There is no doubt that this has been one of the most anticipated Budgets in recent times. After a year seeing unique and significant fiscal policies that have supported the economy throughout Covid-19, there was pressure to see how the government would pay back the large amount of debt incurred during the pandemic, while maintaining an economic platform for growth. In addition, there is the need to help businesses through the post-Brexit transition period.
The Chancellor announced his ‘Budget for recovery’ with a clear focus on continuing and enhancing the economic support for Covid-19 and the rebuilding of public finances to ensure a post-Covid-19 financial recovery and a stable economic future.
Below you will find a summary of the key areas of the Spring Budget:
There are no changes to income tax rates for 2021/22. The personal allowance and basic rate band have been increased in line with CPI. The new personal allowance will be £12,570 with the basic rate band increasing to £37,700, meaning that the higher rate tax threshold will be £50,270. The personal allowance and higher rate threshold will remain fixed until 2025/26.
While there was much speculation ahead of the budget on possible changes to CGT, there were no changes announced to CGT rates or the annual exemption. However, the annual exempt amount will remain frozen at £12,300 for individuals (and personal representatives) and to £6,150 for trustees of settlements, until 2025/26.
The Government intends to publish further tax consultations on 23 March, and we wait to see if CGT changes are amongst them.
Both the nil rate band and residence nil rate band will remain fixed at £325,000 and £175,000 respectively until April 2026.
With the bands frozen for a further five years, this will bring more estates into the IHT net and increase the demand for advice on estate planning. We wait to see if IHT is included in the tax consultations set to be announced on 23 March and, if so, how these may affect wealth transfer.
There will be no inflationary increases to the lifetime allowance (LTA) – it will remain at its current level (£1,073,100) until April 2026.
A prolonged period of no inflationary increases will mean that more and more clients may face LTA charges.
There were no changes to pension tax relief in the Chancellor’s Budget.
Corporation tax is set to rise to 25% from April 2023. However, small companies with profits below £50,000 will continue to pay at the current rate of 19%. There will also be a reintroduction of tapering relief for businesses with profits under £250,000 so that they pay less than the main rate.
The current SDLT nil rate band of £500,000 for residential property acquisitions in England and Northern Ireland will be extended from 31 March to 30 June 2021, with a reduced nil rate band of £250,000 for acquisitions between 1 July and 30 September, after which it will revert to £125,000.
This will be helpful to the residential market and will reduce the current pressure on conveyancers who may be finding it difficult to arrange completion of contracts by 31 March. Although there was no announcement of ‘grandfathering’ of contracts exchanged before the relevant time limit but completed after that time limit, the two-step approach should reduce the ‘cliff edge’ effect of a sudden drop-in nil rate band from £500,000 to £125,000.
The Chancellor also announced a new mortgage guarantee scheme to help first-time buyers get on to the property ladder. The scheme will involve the government guaranteeing 95% mortgages, giving lenders the confidence to reinstate the low-deposit deals which had been withdrawn since the start of the pandemic. The scheme will be available on new and existing properties priced up to £600,000 and will allow buyers to fix their initial mortgage rate for at least five years. It will apply throughout the UK and will run until 31 December 2022.
The government announced the introduction of a new Green Savings Bond, which will be available through National Savings and Investments (NS&I). The product will give ordinary savers the opportunity to invest funds which will be earmarked for ‘green projects’ such as renewable energy. Further details of how the new product will operate, including rates, are expected to be announced over the coming months in advance of the product launch in summer 2021.