We’ve worked with a number of our partners to compile this summary of yesterday’s Budget Announcement.
Before we delve in, this summary isn’t financial advice and we’d recommend seeking advice before taking action. If you are a client of Emery Little, we’ll be in touch directly with any recommendations and will discuss the implications at your next review meeting. If you have any questions in the meantime, just get in touch.
The Chancellor had a few surprises up his sleeve
While the pre-Budget Treasury leaking machine appeared to flag many of the Budget measures announced, the Chancellor still managed to produce some surprises on Budget Day.
As the number of people affected by Covid-19 now appears to be slowing as vaccines are rolled out, Rishi 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.
The Chancellor announced major investment incentives for companies in the next two years, adding further to the government debt mountain. However, after companies have had their investment binge, the widely anticipated corporation tax rise then kicks in with a vengeance as the main rate leaps by 6% to 25% in just two years’ time.
Individual taxpayers did not escape paying their share either, with the Chancellor reaching for the old stealth tax favourite of freezing bands, thresholds and allowances. The inheritance tax nil rate band, which was originally frozen at £325,000 in 2009, is not now due to increase until April 2026.
Over the next year
Key changes for the 2021/22 tax year include:
- The personal allowance will rise to £12,570 and the higher rate threshold will be £50,270 for 2021/22
- In Scotland, the higher rate threshold for non-savings, non-dividend income will rise to £43,662 in 2021/22 as announced in the Scottish Budget.
- The NICs upper earnings limit and upper profits limit will remain aligned to the higher rate threshold at £50,270 for 2021/22
- The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to 30 June 2021 and then replaced by a £250,000 exemption until 30 September 2021.
- The capital gains tax annual exemption, inheritance tax rate nil rate bands and pensions lifetime allowance have been frozen.
- The ISA annual subscription limit for 2021/22 will remain at £20,000 and the corresponding limit for junior ISAs (JISAs) and child trust funds (CTFs) will stay at £9,000.
There are a number of points we want to highlight in relation to your plans. Of course, we’ll discuss any implications for your personal plan at your next review meeting.
- Don’t lose your personal allowance. Your personal allowance of £12,570 in 2021/22 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.
- The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2020/21 and 2021/22 – use it or lose it.
- The lifetime allowance is frozen at £1,073,100 until April 2026. Regularly review the value of your pension benefits and any ongoing contributions.
- CGT reform remains on the agenda and this is something we can discuss at your review.
- Planned increases to corporation tax from April 2023 provides pension planning opportunities for business owners who are looking to extract money from their business in a tax efficient way.
A ‘Plan for Growth’
As a cornerstone of his ‘Plan for Growth’ for post-Brexit Britain, the Chancellor announced the launch of freeports, naming eight throughout England, from Teeside to Plymouth and South Devon. These will enjoy a range of tax benefits including full business rates relief, enhanced capital allowances and stamp duty land tax exemptions.
With the COP26 climate conference due to take place in Glasgow later this year, there were also a number of green initiatives. The first green government bond (a green gilt?) will be issued in the summer. Around the same time National Savings & Investments will launch its own green savings product.
By then, of course, we all hope, the Chancellor perhaps even more than most, to have turned the corner of the last pandemic year.
We’d like to remind you to make sure you get advice before taking action.
If you’d like to discuss any points, please don’t hesitate to get in touch with us.