Yesterday, Chancellor Rishi Sunak had a difficult task in this Budget: to indicate how he might balance the Government's books in the future, while still having to pay out huge sums to support the economy. He said that he would continue to provide 'whatever it takes' to protect businesses and jobs during the present crisis, while being honest about the need to 'fix the public finances' and setting out his plans to build the future economy.
After spending more than £400bn to mitigate the effects of the pandemic, it was inevitable that Mr Sunak would have to raise taxes somewhere - but he was bound by an election promise not to raise the rates of Income Tax, National Insurance Contributions or VAT during the life of the Parliament.
Despite predictions of Capital Gains Tax changes, it will be Corporation Tax instead that increases, but not until 2023, and after extra tax reliefs have been offered for investment in the meantime. There will also be the less visible effect of freezing personal allowances and other reliefs until 2026, increasing the tax take year by year as inflation pushes more people over the limits.
Significant points from the Spring Budget:
- Further support for individuals and businesses impacted by the pandemic: extensions
for job retention scheme and self-employed income support grants, business rates
relief, 5% VAT rate on hospitality and leisure; new grants and loans announced
- Small increase in Income Tax thresholds for 2021/22, followed by a freeze until 2025/26
- Freeze in pension scheme Lifetime Allowance, Capital Gains Tax (CGT) annual exempt amount and Inheritance Tax (IHT) nil rate band until 2025/26
- No change to the rates of CGT
- Corporation Tax rate held at 19% until 31 March 2023, after which companies with
profits over £250,000 will be taxed at 25%
- 'Super-deduction' introduced for companies investing in plant and machinery between
1 April 2021 and 31 March 2023
- Trading losses up to £2 million in 2020/21 and 2021/22 eligible for carry back against
previous 3 years' profits, instead of the usual one year
- Stamp Duty Land Tax 'holiday' for the first £500,000 of residential property cost is
extended to 30 June 2021, with a further reduction in charges up to 30 September 2021
We have created a dedicated Budget Hub which includes our Budget Summary as well as comments from our team. We will be continuously updating over the next few days with reaction videos and other useful insights.
We will review the new proposals to ensure we offer our clients the best advice to help them remain as tax efficient as possible. And our colleagues at MHA Carpenter Box Financial Advisers are always on hand to help manage investments and pensions in these turbulent times.