Nothing says ‘budget’ quite like the sight of the Chancellor of the Exchequer proudly holding aloft the iconic red box. This was never going to be an easy year to deliver a Budget. Fighting the pandemic has led to record levels of borrowing – an eye-watering £270bn which will need to be paid back – but with millions out of work or on furlough, it’s a difficult balancing act.
As the Chancellor set forth his budget, he pledged to do “whatever it takes” to support the economy. Much of it is as expected, and there is plenty to unpack. However, having had a couple of weeks to digest the content and commentary, these are the ten announcements that we think will mean the most to you:
Ten key points from the latest Budget:
- Covid-19 support
The total Covid support package this year and next will be £352bn. Of this, £1.65bn will go to support the UK’s roll-out of the Covid vaccine and ensure it reaches its target of offering a first dose to every adult by 31 July. And some of the money will be used for a trial to see if different vaccine doses can be mixed.
- Furlough extended
The government’s Job Retention Scheme, or furlough, is currently paying up to 80% of the salaries of 6 million people unable to work due to the Coronavirus restrictions. That was due to end in March but will now be extended until the end of September. Nothing will change until July – then employers will be expected to contribute 10%, rising to 20% in August and September.
- Corporation tax rise
Rishi has decided to raise the level of corporation tax to 25%, but this new higher rate won’t take effect until April 2023. He is also introducing a taper for companies with profits above £50,000, so that only businesses with profits greater than £250,000 will be taxed at the full 25%. Small businesses with profits of £50,000 or less will be protected through the creation of a Small Profits Rate, which will stay at the current rate of 19%.
- Changes to tax thresholds
The income tax threshold will increase next year to £12,570, with the higher rate threshold rising to £50,270. It will stay at this level until 2026, so the incremental benefit normally created when thresholds increase with inflation will be frozen. There’s no change to national insurance, VAT or the threshold for inheritance tax, pensions lifetime allowance and capital gains tax.
- Inheritance tax thresholds
Fixed at £325,000 since April 2009, the budget confirmed that the threshold will remain at this level until the 2025/26 tax year.
- Pensions lifetime allowances
Legislation will be introduced in the Finance Bill 2021 to remove the lifetime allowance link to the Consumer Price Index increase for the next five fiscal years. This change will maintain the standard lifetime allowance of £1,073,100 until tax year 2025/26.
- Capital gains tax (CGT)
Investors breathed a sigh of relief as a predicted hike in capital gains tax did not become reality. The annual allowance remains at £12,300 for the next five fiscal years. However, with Sunak having commissioned a review into CGT last year by the government’s Office for Tax Simplification, we can potentially anticipate changes in the future.
- Help for home buyers
The stamp duty holiday on properties worth up to £500,000 introduced last summer will be extended until the end of June. And there’s more help for home buyers as part of government plans to turn “generation rent into generation buy”. A new mortgage guarantee scheme will help home buyers purchase a property worth up to £600,000 with a deposit of just 5%. The government will underwrite the remaining 95%.
- Restart grant for retail and hospitality
A £5bn pot has been announced to help retail, hospitality and personal care businesses reopen from April. Retailers will be eligible for grants of up to £6,000 per premises. While pubs, restaurants and salons, which won’t be able to reopen until June, will be able to claim grants of up to £18,000.
- Support for culture and sport
The Chancellor has added an extra £300m to the government’s £1.57bn Culture Recovery Fund. It’s a sector that currently employs 700,000 people and has been hard hit during the pandemic. £90m will go to help museums, theatres and galleries reopen in England. There will also be a £300m recovery package directed towards cricket, tennis and horse racing, as well as £25m new funding to support grassroots football.
Even though the economy will have suffered its deepest decline for three centuries, the UK economy is forecast to return to pre-Covid levels by middle of 2022. So, as they say, there’s always good news if you know where to look for it!
If the recent announcement has left you wondering what it all means for your personal financial situation, we can always take a closer look. As ever, please get in touch if you’d like to discuss anything in further detail.