The Budget in brief for 2021/22
Chancellor of the Exchequer Rishi Sunak has unveiled the UK’s budget. Innes Reid brings you the Budget in brief for 2021/22.
There had been speculation about the introduction of a Wealth Tax, increasing tax rate bands and/or reforms to Capital Gains Tax.
We received no real shocks from Rishi Sunak and clearly now is not the time to worry about paying off the country’s Covid-19 debt – which currently stands at around £407bn. Rishi Sunak confirmed this while presenting his plans to the House of Commons; stating; “This budget is not the time to set detailed fiscal rules,”
However, the Government is set to announce a series of tax consultations on 23rd March which may begin to reveal their long term plans to balance the books after the unprecedented spending required to deal with the Covid pandemic.
We think the following are the key financial planning points:
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- No changes to rates of Income Tax rates, National Insurance or VAT.
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- Personal Income Tax allowance to increase to £12,570 from April 6th and then frozen until 2026.
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- Higher rate income tax threshold to increase to £50,270 from 6th April and then frozen until 2026.
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- No changes to Inheritance Tax rates or allowances/exemptions.
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- No changes to Capital Gains Tax rates or exemption allowance.
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- The Pensions Lifetime Allowance was due to increase from April 6th according to September. 2020’s CPI rate – a mere 0.5% – but will now remain at its current level of £1,073,100 until April 2026.
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- There has been a freeze on fuel duty for a decade and this will continue for at least another year. About 60% of the price you pay for fuel is tax – a mixture of fuel duty and VAT.
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- The current Stamp Duty Land Tax holiday in England and Northern Ireland – which means no stamp duty is paid on the first £500,000 of a property purchase – will be extended until 30 June. This relief will be reduced to the first £250,000 of a purchase until the end of September, before returning to its pre-pandemic level of £125,000 from the start of October.
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- A government guarantee scheme is to be introduced which means first-time buyers should get a wider choice of mortgages that require a deposit of just 5% of the purchase price.
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- Corporation Tax, paid on company profits, is to rise to 25% from 19%, starting in 2023. However, a new small profits rate would maintain the 19% rate for firms with profits of £50,000 or less. There will be a taper above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
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- Furlough to be extended until the end of September 2021. Government to continue paying 80% of employees’ wages for hours they cannot work. Employers to be asked to contribute 10% in July and 20% in August and September.
- Support for the Self-Employed also to be extended until September.
From a financial planning perspective, in light of such a neutral Budget, all our attention should turn to the current tax year end and to ensuring that you take advantage of 2020/21 allowances and exemptions, use them or lose them.
Please be conscious because of Easter the tax year end effectively falls on the 1st April……don’t be the Fool who leaves it too late!
You might like our blogs:
> Making End of Tax Year 2020/2021 less taxing! (part one – allowances)
> Making End of Tax Year 2020/2021 less taxing! (part two – investments)
> Making End of Tax Year 2020/2021 less taxing! (part three – pensions)
We can help
If you have any End of Tax Year financial requirements and would like to speak with one of our Independent Financial Advisers, please contact us by email: info@innesreid.co.uk or by telephone: 01244 347583 during office hours.
First consultations are free and appointments can be made outside of working hours, face to face or over video conferencing.
