Budget 2021 – Key Points at a Glance

Despite the many rumours beforehand, the Chancellor still managed to produce some surprises on Budget Day. The structure of this Budget, like its predecessor, was driven by the pandemic’s impact on the economy.

As the number of people affected by Covid-19 now appears to be slowing as vaccines are rolled out, Mr Sunak was clear on the government’s intention to see out the next few months as lockdown eases with similar support for businesses and individuals. The existing pandemic schemes with which we have now become familiar – furlough, self-employment schemes, business loans and grants – have been extended through to the end of June or even beyond. He chose to spend big initially, announcing major investment incentives for companies in the next two years, adding further to the government debt mountain.

The total cost of his pandemic measures in this tax year and the next are now projected to be greater than the amount that will be raised in income tax over the same period. How the government can claw back that expenditure, while rebuilding the economy, formed the focus of the Chancellor’s speech.

Below is a summary of some of the key points discussed:

ECONOMY

  • UK economy to grow by 4% in 2021, down from the 5.5% forecast in November
  • An additional £65bn of fiscal support pledged to support the UK economy

BUSINESSES

  • Rate of Corporation Tax will remain at 19% for the next two years. From April 2023 Corporation Tax will be tapered from 19% on profits up to £50,000, increasing to 25% for profits over £250,000
  • Creation of a small profits rate to ensure only firms with profits over £250,000 would be taxed at the higher 25% rate
  • New initiative titled ‘Future Fund: Breakthrough’ launched, injecting up to £375m of taxpayers money into start-up firms, with all government money being matched by private sector venture capital
  • Furlough scheme extended to September this year; it will cover 80% of wages for those not working due to the pandemic. Employers will be expected to make a “small contribution of just 10%” towards payments from July, rising to 20% in August

PROPERTY

  • Stamp duty holiday until the end of June, when the nil rate band will be reduced to £250,000 until 30 September and from 1 October the original £125,000 nil rate band will apply
  • Mortgage Guarantee Scheme being introduced in April 2021 offering mortgages to people with a deposit of just 5% on homes with a value of up to £600,000. The scheme will be available for new mortgages up to 31 December 2022

TAXATION, WAGES & PENSIONS

  • The personal allowance will increase to £12,570 from £12,500 for the 2021/22 tax year and the basic-rate band will increase to £37,700 from £37,500. The personal allowance and the basic-rate band will then be frozen until April 2026
  • Capital Gains Tax annual exemption will remain at £12,300 until April 2026
  • The lifetime allowance has been frozen at its current 2020/21 level of £1,073,100 rather than increasing in line with inflation and will remain at that level until April 2026
  • The annual ISA limit remains at £20,000, and the Junior ISA allowance remains at £9,000
  • Department for Work and Pensions to backdate £3bn in state pension underpayments to women over the next six years

If you have any questions about how any aspects of your tax and financial planning may be affected by the Budget, please contact your Finura adviser.

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