Shorter Reads

Looking at the Budget 2021 from a Private client perspective

Today’s Budget was most notable for its restraint, and for the widely-predicted tax-raising measures which were not, in the end, included. James Austen in our Private Wealth team comments.

1 minute read

Published 3 March 2021

Authors

Share

Key information

PROPERTY

SDLT Holiday Extension

Having heard the representations from housebuilders and buyers, the Chancellor announced that the current SDLT threshold of £500,000 will be extended until 30 June 2021. After that date, there will be a gradual tapering of the allowance, with the SDLT threshold rising to £250,000 until 30 September, and back to the pre-pandemic level of £125,000 from 1 October 2021. This sensible package will give the housing sector more certainty, and allow a smoother transition back to the original rate, avoiding the “cliff-edge” that the property industry was warning of.

Mortgage Guarantee

In parallel with the continued SDLT holiday, the government plans to increase support for first-time buyers, by announcing a mortgage guarantee scheme to support 5% deposits backed by a government guarantee. A number of major high street mortgage lenders are understood to be introducing new products requiring only 5% deposits under this scheme.

PERSONAL TAX

As widely predicted, the Chancellor decided to freeze the Income Tax personal allowance at £12,500 and the higher-rate threshold of £50,000.  Over time, this will mean that more taxpayers will pay Income Tax, and at a higher rate than before – bringing in an estimated £8.180bn in annual tax receipts by 2025/26.  In addition, in a move which will surprise no-one, the Chancellor also announced that the Inheritance Tax nil rate band will be frozen at £325,000, and the Capital Gains Tax annual exempt amount will be frozen at £12,300.  However, against some predictions, the Chancellor decided not to break the Conservative’s ‘triple lock’ manifesto pledge, and so the headline rates of Income Tax, National Insurance and VAT will remain unchanged  (though their thresholds will also be frozen).  Most notably, the Chancellor resisted the temptation to increase CGT in this Budget – a move that had been widely feared (and given cover in the OBR’s CGT Review published in 2020).  Nor is there – yet – any sign of a consultation on possible reforms to CGT or Inheritance Tax, which will be a great relief to more wealthy taxpayers.

Some higher earners may be concerned that the pension lifetime allowance will be frozen at the current level of £1,073,100 (worth £300m to the Exchequer by 2025/26).  But pension tax relief has not been restricted and this is arguably of greater significance to most pension savers.

CORPORATION TAX

As predicted, the Chancellor did announce an increase to the headline rate of Corporation Tax. From April 2023 (NB: not April this year), the headline rate of Corporation Tax will rise to 25%, which is somewhat higher than predicted before the budget. However, in a welcome parallel move to support smaller businesses, the Chancellor announced a new small profits rate of 19% for those businesses with profits of £50,000 or less. The increase between the small profits rate and the headline rate will be tapered so that only those businesses with profits in excess of £250,000 will pay the full 25%.

In a significant move, the Chancellor also announced much more generous loss relief for businesses: they will be able to carry back losses of up to £2m for 3 years which will be a significant lifeline for those businesses carrying tax losses as they return to profit in future.

The Chancellor also announced a new so-called “super deduction” investment relief, which will allow companies to reduce their tax bill by 130% of the cost of capital investment in the UK.  This was announced as being a boost aimed at releasing cash reserves accumulated by some businesses which have done well during the pandemic – but one suspects it may have had as much to do with encouraging a post-Brexit UK investment boom.

Related latest updates
PREV NEXT

Arrow Back to Insights

Shorter Reads

Looking at the Budget 2021 from a Private client perspective

Today’s Budget was most notable for its restraint, and for the widely-predicted tax-raising measures which were not, in the end, included. James Austen in our Private Wealth team comments.

Published 3 March 2021

Associated sectors / services

Authors

PROPERTY

SDLT Holiday Extension

Having heard the representations from housebuilders and buyers, the Chancellor announced that the current SDLT threshold of £500,000 will be extended until 30 June 2021. After that date, there will be a gradual tapering of the allowance, with the SDLT threshold rising to £250,000 until 30 September, and back to the pre-pandemic level of £125,000 from 1 October 2021. This sensible package will give the housing sector more certainty, and allow a smoother transition back to the original rate, avoiding the “cliff-edge” that the property industry was warning of.

Mortgage Guarantee

In parallel with the continued SDLT holiday, the government plans to increase support for first-time buyers, by announcing a mortgage guarantee scheme to support 5% deposits backed by a government guarantee. A number of major high street mortgage lenders are understood to be introducing new products requiring only 5% deposits under this scheme.

PERSONAL TAX

As widely predicted, the Chancellor decided to freeze the Income Tax personal allowance at £12,500 and the higher-rate threshold of £50,000.  Over time, this will mean that more taxpayers will pay Income Tax, and at a higher rate than before – bringing in an estimated £8.180bn in annual tax receipts by 2025/26.  In addition, in a move which will surprise no-one, the Chancellor also announced that the Inheritance Tax nil rate band will be frozen at £325,000, and the Capital Gains Tax annual exempt amount will be frozen at £12,300.  However, against some predictions, the Chancellor decided not to break the Conservative’s ‘triple lock’ manifesto pledge, and so the headline rates of Income Tax, National Insurance and VAT will remain unchanged  (though their thresholds will also be frozen).  Most notably, the Chancellor resisted the temptation to increase CGT in this Budget – a move that had been widely feared (and given cover in the OBR’s CGT Review published in 2020).  Nor is there – yet – any sign of a consultation on possible reforms to CGT or Inheritance Tax, which will be a great relief to more wealthy taxpayers.

Some higher earners may be concerned that the pension lifetime allowance will be frozen at the current level of £1,073,100 (worth £300m to the Exchequer by 2025/26).  But pension tax relief has not been restricted and this is arguably of greater significance to most pension savers.

CORPORATION TAX

As predicted, the Chancellor did announce an increase to the headline rate of Corporation Tax. From April 2023 (NB: not April this year), the headline rate of Corporation Tax will rise to 25%, which is somewhat higher than predicted before the budget. However, in a welcome parallel move to support smaller businesses, the Chancellor announced a new small profits rate of 19% for those businesses with profits of £50,000 or less. The increase between the small profits rate and the headline rate will be tapered so that only those businesses with profits in excess of £250,000 will pay the full 25%.

In a significant move, the Chancellor also announced much more generous loss relief for businesses: they will be able to carry back losses of up to £2m for 3 years which will be a significant lifeline for those businesses carrying tax losses as they return to profit in future.

The Chancellor also announced a new so-called “super deduction” investment relief, which will allow companies to reduce their tax bill by 130% of the cost of capital investment in the UK.  This was announced as being a boost aimed at releasing cash reserves accumulated by some businesses which have done well during the pandemic – but one suspects it may have had as much to do with encouraging a post-Brexit UK investment boom.

Associated sectors / services

Authors

Need some more information? Make an enquiry below.

    Subscribe

    Please add your details and your areas of interest below

    Specialist sectors:

    Legal services:

    Other information:

    Jurisdictions of interest to you (other than UK):



    Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?

    Subscribe to our articles

    Message us on WhatsApp (calling not available)

    Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.

    I accept Close

    Close
    Scroll up
    ExpandNeed some help?Toggle

    < Back to menu

    I have an issue and need your help

    Scroll to see our A-Z list of expertise

    Get in touch

    Get in touch using our form below.



      Business Close
      Private Wealth Close
      Hot Topics Close