Following the budget announcement from Chancellor of the Exchequer, Rishi Sunak, on 3 March, changes will be made in line with government’s priorities to continue the support to businesses and individuals as we recover from the coronavirus’ economic effects.
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.
Of course, to fund this £65bn relief, at least some of that will need to come from taxes. Here are a few things you need to know about what’s changing.
Personal Allowance and higher rate threshold (HRT)
The Income Tax Personal Allowance and the higher rate tax (HRT) will both rise as previously planned to £12,570 and £50,270, respectively, from April 2021. However, they will remain frozen at this level until April 2026.
National Insurance contributions (NICs) thresholds
NICs thresholds will rise with CPI as previously planned, which will bring the NICs Primary Threshold/Lower Profits Limit to £9,568 and the Upper Earnings Limit (UEL)/Upper Profits Limit (UPL) to £50,270, aligning with the Income Tax HRT. The UEL/ UPL will then remain aligned with the HRT at £50,270 until April 2026.
Inheritance Tax nil-rate band and residence nil-rate band
There will be no changes to the Inheritance Tax nil-rate band until April 2026.
- The nil-rate band will remain at £325,000,
- The residence nil-rate band will remain at £175,000, and
- The residence nil-rate band taper will still start at £2 million.
Eligible estates can continue to pass on up to £500,000 while the qualifying estate of a surviving spouse or registered civil partner can continue to pass on up to £1 million without an Inheritance Tax liability.
Capital Gains Tax Annual Exempt Amount (AEA) uprating
The Annual Exempt Amount (AEA), the value of gains that a taxpayer can realise before paying Capital Gains Tax will remain at its current level of £12,300 for individuals, personal representatives, and select types of trusts and at £6,150 for most trusts until April 2026.
We can help you with your financial planning
If you’re concerned about how these tax changes will affect you or your business, take the time to review your financial plans and ensure they’re optimal given the new circumstances and don’t hesitate to schedule a financial review with us today.
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