The UK chancellor, Rishi Sunak, delivered his budget on 3 March 2021.
Cutting through the rhetoric, what does it all mean for personal finances and international investment?
In his opening remarks, Rishi said that he would do “whatever it takes” during the pandemic but he also highlighted the “acute” damage that the pandemic had done to the economy. These two sentiments were found throughout his budget.
In essence Rishi was generous in his budget by extending furlough and business support without making significant tax increases. However, he made some changes to increase the tax take with a warning that painful decisions will need to be made in the future.
Only changes that would be incorporated into the next Finance Bill were announced. Further tax-related consultations are to be published on 23 March 2021. The budget was not particularly controversial, save perhaps for the increase in corporation tax. There were not CGT increases and no introduction of wealth tax, yet. It will be interesting to see what is published at the end of March.
Key points at a glance
Tax on company profits will rise from 19% to 25% in April 2023. Those with profits of less than £50,000 will be taxed at 19%, with the rate tapering up to 25% for companies’ whose profits are above £250,000.
Stamp Duty Land Tax (SDLT)
The SDLT holiday on properties worth up to £500,000, due to end on 31 March 2021 has been extended to 30 June 2021. The nil rate band will then reduce to £250,000 until 30 September. After that the nil rate band will return to the usual £125,000.
Capital gains tax (CGT)
Again, there was no increase in CGT rates as many predicted or feared. Instead, the annual exempt allowance will be frozen at its current level of £12,300 for individuals and £6,150 for trusts until 2026.
Inheritance tax (IHT)
No huge rewrite of the IHT rules. The status quo continues with confirmation that the nil rate band will remain at £325,000 and the residence nil-rate band will continue to be £175,000.
No sign of wealth tax. Many will breathe a sigh of relief, I am sure.
There is no income tax increase, but more people will end up paying income tax. The income tax thresholds will rise from their current levels in line with inflation in April 2021. They will then remain at that level until April 2026. The personal allowance (the point at which people start paying tax) will remain at £12,570 until April 2026 and the higher rate will be £50,270.
As Rishi alluded to, not so subtly, there are some difficult decisions to make in the coming years. Tax rises and redesigns are not off the table.
The government will be publishing tax-related consultations on 23 March. It will be interesting to see what they say and may give us a better picture of what the tax landscape will look like in the coming years.