Budgets announced from Westminster are probably not the most exciting events in the annual calendar, however they are still important in making sure your money stays in order.
We often comment at the time of a Budget that the Chancellor of the time is 'stuck between a rock and a hard place'. This has never been a truer statement, and although he has been relatively cautious on tax rises on this occasion, to give the economy more time to recover, we do anticipate a more aggressive stance in an Autumn Statement (or indeed second Budget) later this year.
The Budget was very much about cash flow: encouraging the release of stockpiled cash through new investment to stimulate the economy, jobs and growth, whilst restraining tax increases.
We have put together some key headlines that will affect personal finances from the recent Budget for the next tax year which we hope is helpful.
Personal finances
The personal income tax allowance will rise to £12,570 in April 2021, as planned, and will then be frozen from 2022 to 2026.
The higher rate income tax threshold will rise to £50,270 in April 2021, as planned, and will then be frozen from 2022 to 2026.
The Inheritance Tax threshold will be maintained at the existing level of £325,000 until April 2026.
The Lifetime Allowance (LTA) for pension benefits will be frozen at its current level of £1,073,100 until April 2026.
The annual exempt amount for capital gains (CGT) will be maintained at its existing level of £12,300 until April 2026.
The adult ISA allowance will remain unchanged at £20,000 and the JISA and Child Trust Fund allowance at £9,000 for tax year 2021/2022.
The stamp duty holiday (£500,000 nil rate band) has been extended to 30 June – it was planned to end on 31 March. To smooth the transition back to normal, the nil rate band will be £250,000 until the end of September and will return to £125,000 on 01 October 2021.
For homebuyers who can only afford a deposit of 5%, a new mortgage guarantee scheme will enable all UK homebuyers to secure a mortgage up to £600,000 with a 5% deposit.
The Universal Credit uplift of £20 will continue for a further six months (and equivalent support for those on working tax credits).
The minimum wage will increase to £8.91 per hour from April 2021.
The contactless payment limit will rise to £100 later this year (was £30, raised to £45 less than a year ago).
A 'green' retail savings product will be available through NS&I in the summer of 2021. This will give UK savers the chance to take part in the collective effort to tackle climate change.
The pandemic has affected many individuals who run small companies, sometimes called micro-companies, and the like. We thought we would add a few notes in for businesses as well.
Business finances
From April 2023, the rate of corporation tax paid on company profits will increase to 25%. The rate of corporation tax will remain at 19% for those businesses generating profits of £50,000 or less. The rate will taper for profits above this level, so only businesses with profits of £250,000 or more will be taxed at the full 25% rate.
A 'super-deduction' to encourage businesses to use their cash reserves and invest: for the next two years, when companies invest, they can offset 130% of the cost against their tax bill.
More generous tax treatment of losses for the next two years.
Restart Grants will be available from April to help businesses reopen and get going again – as noted above, businesses such as hospitality and personal care, which have been more affected by the pandemic and will open later, will be able to apply for grants up to £18,000. Non-essential retail businesses will receive up to £6,000 per premises.
The 100% business rates holiday in England for retail, hospitality and leisure will continue at 100% until the end of June 2021. For the remaining nine months, a discount of 66% will apply, up to a maximum of £2M, with a lower cap for those businesses that were able to remain open.
The reduced rate of VAT of 5% for the hospitality and tourism industry will be extended for six months to September 2021. Following this, an interim rate of 12.5% will apply until April 2022, at which point the standard VAT rate of 20% will apply.
The incentive payment to take on a new apprentice (of any age) will be doubled to £3,000.
If you want to know all the in-depth details as we head towards Easter, have a look here: https://www.gov.uk/government/news/budget-2021-what-you-need-to-know
Summary
We hope this update is helpful in looking at the recent Budget.
Don't forget that the end of this tax year is approximately two weeks away at the time of writing (effectively falling early this year), which is not long if you need to achieve updates to your financial planning in time.