Experts weren’t sure how much coronavirus relief would dictate the shape of the budget. But the Chancellor’s plan centres on measures that help businesses and and support jobs through the pandemic and using tax raises to help balance the books.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
Before Chancellor Rishi Sunak’s Budget 2021 announcement, speculation about what exactly would be included was rife. The wait is over and here is an overview of the key points:
Coronavirus support
Furlough – With a promise to ‘protect jobs and livelihoods’, the chancellor announced that furlough is to be extended until the end of September and the government will continue to pay 80% of employees’ wages for hours they cannot work. Employers will be asked to contribute 10% in July and 20% in August and September.
Self-employed – For the self-employed, support will also be extended until September and a further 600,000 self-employed people will be eligible for help as more grants become available. The fourth SEISS grant will cover February to April, and it is worth 80% of average trading profits up to £7,500.
Universal Credit – The £20 weekly uplift in Universal Credit (worth £1,000 a year) will be extended for another six months while working Tax Credit claimants will get a one-off £500 payment. Starting April, minimum wage increases to £8.91/hour.
Small business – For small businesses, a “help to grow” scheme will be offered to train business owners on businesses management and digital training to help recover and regrow their companies.
Tax changes
The good news is that there were no changes to income tax, national insurance, or VAT rates.
Additionally, the tax-free personal allowance will be frozen at £12,570 and the higher rate income tax threshold will be frozen at £50,270 from April 2021 through to 2026.
As for corporation tax on company profits above £250,000, it will rise from 19% to 25% in April 2023 but for smaller companies with profits less than £50,000, the rate will be kept at 19%.
Companies will be able “deduct” investment costs from tax bills thereby reducing taxable profits and offset losses going back up to three years, allowing businesses to claim additional refunds.
Mortgages and property
The stamp duty holiday on house purchases in England and Northern Ireland has been extended to 30 June with no tax to be charged on sales of less than £500,000.
Inheritance tax thresholds, pensions lifetime allowances, and annual capital gains tax exemptions will all be frozen at their 2020-2021 tax year levels until 2025-26.
With all these changes, even with simple inflation raises, many more people are expected to start paying income tax or become higher rate earners by 2026.
For a more comprehensive overview, download our Financial Guide:
Next steps
The shrunken economy is expected to rebound this year with a predicted annual growth of 4% and expectations are for the economy forecast to return to pre-COVID levels by mid-2022. But with job loss levels and peacetime borrowing hitting record levels, the future is still uncertain
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