Chancellor Rishi Sunak unveiled the contents of his 2021 Budget last Wednesday. He set out the government’s plan for long-term economic recovery in the House of Commons- which included new support measures for jobs and businesses, changes in taxation and more. We have summarised a few of the main points below.
Furlough: The Coronavirus Job Retention scheme will be extended until the 30th September 2021. Furloughed workers will still receive 80% of their wages with employers being asked to contribute 10% of this in July and then 20% in August and September. Support for the self-employed has also been extended until September, with the eligibility to support grants being widened to allow more access for the self-employed.
Taxation: The announcement heard no changes to the rates of income tax, national insurance and VAT for individuals currently. The Personal Allowance will see an increase from £12,500 to £12,570 in 2021/22 and will remain as such until April 2026. This applies to everyone in England, Scotland, Wales and Northern Ireland.
Similarly, the allowance higher rate tax payers will increase from £37,500 to £50,000 to £50,270. This applies in England, Northern Ireland and Wales. While technically the Government hasn't raised tax rates, its decision to freeze thresholds means many who get a wage rise – even if it's just in line with inflation – will end up paying more in income tax because they're drawn into a higher tax bracket
Like with income tax, capital gains and inheritance tax will be frozen at their current threshold until April 2026 also. Corporation tax on profits over £250,000 will increase from 19% to 25% in April 2023. For the Hospitality & Leisure businesses alike- the lower VAT rate of 5% will remain until September
Pensions: The Budget also outlined that The Lifetime Allowance i.e. the total amount you can save into a pension without being taxed, will be frozen at £1,073,100 until April 2026. It is estimated that only 10,000 pension savers will exceed this threshold over the 5 year period. The Budget also confirmed the state pension will rise by 2.5% for the 2021/22 tax year
Savings: No changes will occur to the annual allowance for the ISA and Junior ISA- the annual savings limit will remail at £20,000 and £9,000 respectively. The Chancellor announced a new “Green Savings Bond” which he states will give “all UK savers the opportunity to take part in a collective effort to tackle climate change.” More details on such are to come.
Property: The temporary Stamp Duty Holiday on property purchases will be extended until the 30th June for England and Northern Ireland. After that, the property threshold will be reduced to £250,000 until 30th September, at which it will return to the normal rate of £125,000.
Plans were also announced to help first-time buyers with the introduction of government guaranteed 5% deposit mortgages on sales up to £600,000. The Chancellor announced that several major banks were on board and deals should be available in April- however, money saving expert Martin Lewis warned of the potential high cost of such mortgages and suggests first-time buyers still aim for a 10% deposit if possible.
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