Rishi Sunak delivered his second Budget on 3 March 2021.
Here are the main points to digest:
The furlough scheme and self-employed grants have been extended until the end of September. The furlough scheme currently pays 80% of employees wage for the hours they cannot work in the pandemic. Employers will be expected to pay 10% towards the hours their staff do not work in July, rising to 20% in August and September. Newly self-employed who had filed a tax return by midnight on 2 March will qualify for the self-employed grant.
There are no changes to income tax rates for 2021/22. The personal allowance and basic rate band have been increased in line with inflation. The new personal allowance will be £12,570 with the basic rate band increasing to £37,700, meaning that the higher rate tax threshold will be £50,270. The personal allowance and higher rate threshold will remain fixed until 2025/26.
Capital Gains Tax
While there was much speculation ahead of the budget on possible changes to CGT, there were no changes announced. However, the annual exempt amount will remain frozen at £12,300 for individuals (and personal representatives) and to £6,150 for trustees of settlements, until 2025/26.
The Government intends to publish further tax consultations on 23 March and we wait to see if CGT changes are amongst them.
Both the nil rate band and residence nil rate band will remain fixed at £325,000 and £175,000 respectively until April 2026.
With the bands frozen for a further five years, this will bring more estates into the IHT net and increase the demand for advice on estate planning. We shall wait to see if IHT is included in the tax consultations set to be announced on 23 March and, if so, how these may affect wealth transfer.
Corporation tax is set to rise to 25% from April 2023. However, small companies with profits below £50,000 will continue to pay at the current rate of 19%. There will also be a reintroduction of tapering relief for businesses with profits under £250,000 so that they pay less than the main rate.
The lifetime allowance will be maintained at the current level of £1,073,100 until April 2026.
The annual allowance remains at £40,000 for 2021/22.
There have been no changes to contribution limits or any other areas.
If you would like to discuss any of these changes and how they may affect you personally, do drop us a line.