Budget 2021: What does it mean for you as an individual?
Chancellor Rishi Sunak today delivered his first Budget since the conclusion of Brexit. Whilst there were hints of what the country’s position on the world stage might look like, it was a Budget that understandably focused on continued support to businesses and individuals affected by the COVID pandemic.
It was a Budget to provide a COVID-weary nation with a ‘financial breather’ but with announcements of significant increases in tax rates for companies and more subtle increases in tax for individuals in the not-too-distant future.
The Chancellor is giving tax-breaks on investment now to kick-start the economy only to claw it back in a few years’ time.
The Budget seems to look to businesses to shoulder much of the cost of the government’s Coronavirus pandemic support. But, whilst there are no increases in rates of tax, there are several measures announced that will affect individuals and their families.
We outline the top implications for individuals and their families.
Income Tax thresholds frozen.
The tax-free Personal Allowance and higher rate thresholds will increase in April 2021 in line with inflation but will then remain frozen until April 2026. The Personal Allowance will increase to £12,570 and the higher rate threshold to £50,270 next month. The freeze will mean that individuals will effectively pay more tax in subsequent years.
Stamp Duty Land Tax holiday extended.
The Stamp Duty Land Tax holiday on the first £500,000 of value due to end in March will now be extended through to 30 June, allowing individuals that may have missed out on this tax break to still qualify. The threshold will then be reduced to £250,000 until September reverting to its pre-COVID £125,000 level from 1 October.
The return of 95% mortgages.
The government is looking to help first-time buyers by encouraging mortgage lenders to introduce 95% mortgages on property up to £600,000.
Support for the self-employed.
Self-employed individuals will be able to access a fourth Coronavirus Self-Employed Income Support Scheme grant for February to April of up to 80% of the average of three months’ profits, capped at £7,500. This will be available to those who reported self-employment income on their 2019/20 Tax Return and more people will be eligible than for the first three grants. A fifth and final grant will be available for May to September, with the level of the grant dependant the impact of COVID-19 on turnover.
No change for CGT and IHT.
The much-heralded changes to Capital Gain Tax did not make this year’s Budget, much to the relief of many. It remains, however, firmly in the Chancellor’s sights and we would not be surprised to see changes in future Budgets. The Inheritance Tax threshold has been frozen until 2026. By this time the threshold will not have increased from the £325,000 level set in 2009, a period of 17-years. With house prices in the South East increasing by over 70% since 2009, more and more families will fall into the IHT net.
There has been no change to the tax relief available on pension contributions, but the Lifetime Allowance, the maximum value you can have in your pension fund without incurring a tax charge, is being frozen at £1.073m until April 2026. This will mean more people will be subject to a Lifetime Allowance tax charge because of future increases in the value of their pension funds, even if they do not make further contributions.
We will be regularly updating the Budget pages of our website. If you would like to discuss the implications, please don’t hesitate to get in touch. Alternatively, book your place on our Budget question time webinar on Friday 5 March 2021 to find out more.
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