Our 2021 Spring Budget Summary

The 2021 spring budget is a budget of two halves. The Chancellor, Rishi Sunak, outlined very few changes to pensions and investments. The continuing Coronavirus pandemic and the recovery of the UK economy as restrictions are eased over the coming months remained the focus of fiscal plans.

Further announcements on a range of tax consultations and calls for evidence are expected to be published on 23rd March. In this article, we have summarised the key points for you.

2021 Spring Budget Breakdown

Income Tax

Income tax rates will remain the same. The Personal allowance will increase to £12,570 for 2021/22, in line with the September CPI figure. The higher rate threshold for English, Welsh and Northern Irish taxpayers will increase to £50,270 and will be frozen at this level until 5th April 2026.

National Insurance

There will be no changes to the previously announced National Insurance rates for the 2021/22 tax year. The NI Upper Earnings Limit and Upper Profits Limit will remain in line with the higher rate threshold of £50,270.

Capital Gains Tax (CGT)

CGT rates will remain the same. The Individual CGT annual exemption of £12,300 remains frozen until 5th April 2026. The trust annual exemption will remain at £6,150.

ISA thresholds

ISA thresholds and the Junior ISA limit remain the same for 2021/22 at £20,000 and £9,000.

LISA withdrawal charge

From 6th April 2021, the LISA withdrawal charge returns to 25%.

Inheritance tax

The basic and residence nil rate bands remain frozen until 5th April 2026. The basic nil rate band is £325,000 and the residence nil rate band is £175,000.

Corporation tax

From April 2023, Corporation Tax will increase to 25% for businesses with profits of more than £250,000. Companies with profits less than £50,000 will continue to pay 19% Corporation Tax. There will be marginal relief introduced for businesses whose profits are between £50,000 and £250,000.

Subject to certain thresholds, unincorporated and incorporated companies will be able to increase trading losses carried back from one to three years for 2020/21 and 2021/22.

Green National Savings & Investments (NS&I) product

From summer 2021, this new NS&I product will be offered to allow savers to take part in efforts to reduce the impact of climate change.

Contactless payment

The contactless payment card limit will increase to £100 later this year.

Mortgage Guarantee Scheme

Borrowers will be able to borrow up to £600,000 with a 5% deposit from April 2021. There will be the option to fix the mortgages for at least five years, and this will apply to mortgages up to 31st December 2022.

Coronavirus Support Schemes

Employees will continue to receive 80% of their salary (up to £2,500 per month) as part of the Coronavirus Job Retention Scheme (CJRS). The CJRS has been extended until the end of September 2021. From July onwards, government support will be tapered, with employers required to pay 10% of unworked hours, rising to 20% in August and September. Employers will also continue to cover the cost of employer National Insurance and any pension contributions due.

The Self-Employment Income Support Scheme (SEISS) is also being extended until the end of September 2021. A fourth grant covering February to April 2021 can be claimed from late April, providing 80% of three months average trading profits. This is capped at £7,500. To be eligible, a tax return must have been completed for 2019/20.

As the economy reopens, a fifth and final grant can be claimed, covering May to September 2021. This will be targeted at the businesses that need it most. Those whose turnover has fallen by 30% or more will receive 80% of three months average trading profits, up to £7,500. Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,500.

Pensions

Lifetime allowance

The maximum amount of benefits an individual can take from their pension savings before incurring a tax charge, also known as the lifetime allowance, remains fixed at £1,073,100 until 5th April 2026.

Auto-enrolment charge cap consultation

The Government aims to support the UK economy post-COVID by encouraging the broader investment of pension assets. Consultation is due to begin on whether certain costs within the auto-enrolment charge cap affect pensions schemes’ ability to invest in a broader range of assets, such as high growth companies. The DWP will also draft regulations making it easier for schemes to take up such investment opportunities within the charge cap by smoothing out certain performance fees over multiple years.

State pension underpayments

It is estimated that £3 billion will be needed over the next six years to address underpayments of the State Pension to women going back over several years. An investigation by the DWP in 2020 highlighted the scale of the issue. Since January 2021, a repayment programme has commenced.

Get in touch to find out more about how the 2021 Spring Budget will affect you. To find out more about how these latest announcements may impact your financial position, please telephone us on 01772 729742 or simply fill out our online enquiry form to arrange a meeting with one of our advisors.

Please note that the information provided is based on our current understanding of the 2021 Spring Budget and associated documents and may be subject to alteration due to changes in legislation or practice.