Please read our summary of the key announcements in yesterday’s Budget 2021 statement.
While the pre-Budget Treasury leaking machine appeared to flag many of the Budget measures announced, the Chancellor still managed to produce some surprises on Budget Day.
As the number of people affected by Covid-19 now appears to be slowing as vaccines are rolled out, Mr Sunak was clear on the government’s intention to see out the next few months as lockdown eases with similar support for businesses and individuals. The existing pandemic schemes with which we have now become familiar – furlough, self-employment schemes, business loans and grants – have been extended through to the end of June or even beyond.
The total cost of his pandemic measures in this tax year and the next are now projected to be greater than the amount that will be raised in income tax over the same period. How the government can claw back that expenditure, while rebuilding the economy, formed the focus of the Chancellor’s speech.
Some of the other highlights were:
• The main rate of corporation tax will be increased to 25% from April 2023 for companies with profits of at least £250,000. At the same time, a new small companies’ rate of 19% will apply to companies with profits of up to £50,000.
• For the two years from April 2021, companies investing in qualifying new plant and machinery will benefit from a 130% first-year super-deduction.
• The personal allowance will rise to £12,570 and the higher rate threshold will be £50,270 for 2021/22 and both will then be frozen for the next four tax years.
• The capital gains tax annual exemption, inheritance tax rate nil rate bands and pensions lifetime allowance will all be frozen at their current levels until April 2026.
• The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to 30 June 2021 and then replaced by a £250,000 value exemption until 30 September 2021.
Although the freeze on tax rates, bands and allowances may be unwelcome, the Chancellor has refrained from increasing the rate of capital gains tax and reducing the amount of pension tax relief which was the subject of widespread media speculation in the last few months. However, there is a belief that he will revisit these areas in the future, possibly next year’s Budget if the virus has been controlled and the economy is starting to recover.