The key points of the Spring Budget 2021
Chancellor of the Exchequer, Rishi Sunak, delivered his second Budget on 3 March, which centred on a three-part plan to continue supporting people and businesses through the pandemic, to fix public finances once recovery is underway and to lay the foundations for the future economy.
The Chancellor opened his statement by revealing the latest predictions from the Office for Budget Responsibility (OBR) which provide hope of “a swifter and more sustained economic recovery” than previously expected. The latest forecast predicts growth for the UK economy of 4% in 2021 and 7.3% in 2022. Mr Sunak also confirmed details of various COVID-19 support measures to bring total fiscal support to over £407bn.
From a taxation perspective, the Chancellor was left with little room for manoeuvre as the Conservative manifesto pledged not to lift Income Tax, National Insurance or VAT rates, so some key tax thresholds will be frozen. The Personal Allowance will rise with inflation in April as planned, to £12,570, before 20% Income Tax becomes payable, and the higher rate threshold, at which people start to pay tax at 40%, will rise to £50,270. However, both thresholds will then be frozen at these levels until April 2026. Similarly, tax thresholds for the pension Lifetime Allowance, Inheritance Tax and the annual exemption for Capital Gains Tax will remain until 2026.
Interestingly, a new NS&I retail ‘green savings bond’ will be launched later this year to fund renewable energy and clean transport projects.
Job support
• Furlough scheme extended until 30 September 2021 – the government will continue to pay 80% of employees’ wages up to £2,500 a month until the end of June, employers then pay a 10% contribution in July, rising to 20% in August and September
• The Self Employment Support Scheme also extended until the end of September.
Business support & taxation
• A new ‘Recovery Loan Scheme’ replacing previous emergency government funding to support businesses, offers loans between £25,000 and £10m up to 31 December 2021 (government provides an 80% guarantee)
• A new ‘Restart Grant’ scheme provides retail, hospitality, accommodation, leisure and personal care firms up to £18,000, and non-essential retailers £6,000
• Business Rates Relief for retail and hospitality firms has been extended for three months to 30 June 2021, with a two thirds discount available until 31 December 2021
• Headline rate of Corporation Tax will rise from 19% to 25% in April 2023; a tapered rate will be introduced for profits above £50,000, so that only businesses with profits of £250,000 or more will be taxed at the full 25% rate, businesses with profits of £50,000 or less will continue to be taxed at 19%
• To encourage business investment, a temporary ‘super-deduction’ tax incentive scheme will cut companies’ tax bills by 25p for every £1 they invest, by providing allowances of 130% on qualifying investment in new plant and machinery, from 1 April 2021 to 31 March 2023
• VAT 5% reduced rate for tourism and hospitality sectors extended until 30 September 2021, followed by an interim rate of 12.5% for six months.
Personal taxation, wages and pensions
• From 6 April 2021 Personal Allowance increased to £12,570 and the Income Tax higher rate threshold increased to £50,270, both thresholds will remain at these levels until April 2026
• National Insurance threshold increased to £9,568 from 6 April 2021, the Upper Earnings Limit will be £50,270
• Inheritance Tax nil-rate band remains at £325,000 and residence nil-rate band at £175,000, until April 2026
• Capital Gains Tax annual exemption remains at £12,300 for individuals and £6,150 for most trusts
• Lifetime Allowance for pensions remains at £1,073,100 until April 2026, the Annual Allowance remains at £40,000
• New single-tier State Pension increased to £179.60 per week in April 2021, the older basic State Pension increased to £137.60 per week
• ISA (Individual Savings Account) allowance remains at £20,000 for the 2021/22 tax year
• JISA (Junior Individual Savings Account) allowance or Child Trust Fund annual subscription limit remain at £9,000 for the 2021/22 tax year
• National Living Wage increased to £8.91 per hour from April 2021 and will include those aged 23 and over.
Property transactions
• Stamp Duty (SDLT) holiday on house purchases in England and Northern Ireland extended, with the £500,000 threshold at which SDLT starts to apply ending on 30 June, a threshold of £250,000 applies for a further three months, with the regular £125,000 threshold returning from 1 October 2021. In Wales, the Land Transaction Tax (LTT) temporary tax reduction has been extended to 30 June 2021
• Mortgage guarantee scheme introduced from April, with the government providing guarantees to UK lenders who offer mortgages to buyers to secure a loan with a 5% deposit on a property of up to £600,000 up to 31st December 2022.
