Our guide to the 2021 Budget provides a clear and concise commentary of the key Budget announcements, focusing on the issues pertinent to our clients, their families and their businesses. Rishi Sunak delivered his second Budget to an almost empty parliament yesterday, with significant changes announced for both families and business.
We were pleased to see no dramatic changes to Capital Gains Tax, Inheritance Tax or Tax Relief on Pension Contributions – all of which had been rumoured in recent months and no doubt explored by Government. Instead we have a pledge of further financial support through furlough and business intervention schemes, to nurture the economy back to full health.
With vast national debts accruing, Rishi has chosen two distinct methods to raise funds to begin repaying the debts we have brought about by offering such support.
- Freezing the Personal Allowance, Higher Rate Tax threshold, the Capital Gains Annual Exempt Amount and the Pension Lifetime Allowance, until 2026. Whilst this is less penal than directly increasing tax rates, the impact is significant when you compound the long term effects of this 5-year freeze over a lifetime.
- Increasing Corporation Tax from 19% to 25% in 2023. Although a 6% increase may only sound like a small change, the relative increase is more than +30%. This is a major change and will push Corporation Tax Rates almost as high as was promised in Labour’s 2019 manifesto. There are some caveats; including a reduced rate for businesses who make annual profit of less than £50,000, some tapering between this figure and £250,000, and any company losses can now be carried back further than before, creating the opportunity for a tax reclaim for companies that have made a loss. For the two years until the higher rate of Corporation Tax is introduced, there is a new ‘super-deduction’ tax incentive – effectively a tax saving mechanism for businesses to motivate spending on qualifying plant and machinery.
What does the budget mean for you?
All boosst clients will see some impact from this weeks announcements.
Company Owners will benefit from thoughtful guidance to make best use of the new ‘super-deduction’ tax incentive and the new ‘Help to Grow’ scheme.
House buyers may benefit from an extended Stamp Duty holiday and a new Mortgage Guarantee Scheme for lenders means that 5% deposits will be available once again for properties up to £600,000.
All Individuals with earnings will be impacted by the frozen tax thresholds for the next five years.
Individuals with significant retirement savings (in both personal and final salary pensions) will need careful advice to make optimal use of tax relief within the clawed back Lifetime Allowance.
These significant changes highlight the importance of ongoing Financial Planning to ensure that your finances are operating as efficiently as possible to achieve your desired lifestyle. We have already started to examine how boosst clients will be impacted and we will highlight any opportunities and threats presented by these changes at your next planning meeting.
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