A delicate balance
The Chancellor had a difficult task in this Budget: to indicate how he might balance the Government’s books in the future, while still having to pay out huge sums to support the economy. He said that he would continue to provide ‘whatever it takes’ to protect businesses and jobs during the present crisis, while being honest about the need to ‘fix the public finances’ and setting out his plans to build the future economy.
After spending so much, it was inevitable that Mr Sunak would have to raise taxes somewhere – but he was bound by an election promise not to raise the rates of Income Tax, National Insurance Contributions or VAT during the life of the Parliament. There has been speculation that he might reduce relief for pensions or bring Capital Gains Tax rates in line with Income Tax. In the event, neither was mentioned; we are promised consultation documents on 23 March that may raise those possibilities, but they are not an immediate prospect. Instead, Corporation Tax will go up – not until 2023, and after extra tax reliefs have been offered for investment in the meantime. There will also be the less visible effect of freezing personal allowances and other reliefs until 2026, increasing the tax take year by year as inflation pushes more people over the limits.
When the Chancellor sits down, the Government publishes everything on the internet – measures he hasn’t mentioned, the detail of things he only touched on and the tables of financial estimates that show what makes a big difference to the public finances and what is marginal. This booklet summarises the most important points and explains how they affect businesses and individuals. We will be happy to discuss the proposals with you and help you understand the implications for your finances.
- Further support for individuals and businesses impacted by the pandemic: extensions for job retention scheme and self-employed income support grants, business rates relief, 5% VAT rate on hospitality and leisure; new grants and loans announced
- Small increase in Income Tax thresholds for 2021/22, followed by a freeze until 2025/26
- Freeze in pension scheme Lifetime Allowance, Capital Gains Tax (CGT) annual exempt amount and Inheritance Tax (IHT) nil rate band until 2025/26
- No change to the rates of CGT
- Corporation Tax rate held at 19% until 31 March 2023, after which companies with profits over £250,000 will be taxed at 25%
- ‘Super-deduction’ introduced for companies investing in plant and machinery between 1 April 2021 and 31 March 2023
- Trading losses up to £2 million in 2020/21 and 2021/22 eligible for carry back against previous 3 years’ profits, instead of the usual one year
- Stamp Duty Land Tax ‘holiday’ for the first £500,000 of residential property cost is extended to 30 June 2021, with a further reduction in charges up to 30 September 2021