The Budget delivered on 3rd March is just about the best we are going to get during the pandemic crisis. Fighting the pandemic has led to record levels of borrowing – an eye-watering £270bn which will need to be paid back – but with millions out of work or on furlough, it’s a difficult balancing act.
After much speculation about the announcements, the Chancellor delivered a Budget with few surprises. As he set forth his plans, Rishi Sunak pledged to do “whatever it takes” to support the economy. This is a Chancellor who is concerned about the future of the economy, and for many of you, this Budget will have a big impact on your personal taxes.
These are the seven announcements that will be of most interest to you:
1. Changes to tax thresholds
The income tax threshold will increase next year to £12,570, with the higher rate threshold rising to £50,270. It will stay at this level until 2026, so the incremental benefit normally created when thresholds increase with inflation will be frozen. There’s no change to National Insurance, VAT or the threshold for Inheritance Tax. Additionally, the Pensions’ Lifetime Allowance will not rise with inflation as planned. Both the Lifetime Allowance and Capital Gains Tax have been frozen until 2026.
2. Help for home buyers
The stamp duty holiday on properties worth up to £500,000 introduced last summer will be extended until the end of June. And there’s more help for home buyers as part of government plans to turn “generation rent into generation buy”. A new mortgage guarantee scheme will help home buyers purchase a property worth up to £600,000 with a deposit of just 5%. The government will underwrite the remaining 95%.
3. Covid-19 support
The total Covid support package this year and next will be £352bn. Of this, £1.65bn will go to support the UK’s roll-out of the Covid vaccine and ensure it reaches its target of offering a first dose to every adult by 31 July. And some of the money will be used for a trial to see if different vaccine doses can be mixed.
4. Furlough extended
The government’s Job Retention Scheme, or furlough, is currently paying up to 80% of the salaries of 6 million people unable to work due to the Coronavirus restrictions. That was due to end in March but will now be extended until the end of September. Nothing will change until July – then employers will be expected to contribute 10%, rising to 20% in August and September.
5. Corporation tax rise
Rishi has decided to raise the level of corporation tax to 25%, but this new higher rate won’t take effect until April 2023. He is also introducing a taper for companies with profits above £50,000, so that only businesses with profits greater than £250,000 will be taxed at the full 25%. Small businesses with profits of £50,000 or less will be protected through the creation of a Small Profits Rate, which will stay at the current rate of 19%.
6. Restart grant for retail and hospitality
A £5bn pot has been announced to help retail, hospitality and personal care businesses reopen from April. Retailers will be eligible for grants of up to £6,000 per premises. While pubs, restaurants and salons, which won’t be able to reopen until June, will be able to claim grants of up to £18,000.
7. Support for culture and sport
The Chancellor has added an extra £300m to the government’s £1.57bn Culture Recovery Fund. It’s a sector that currently employs 700,000 people and has been hard hit during the pandemic. £90m will go to help museums, theatres and galleries reopen in England. There will also be a £300m recovery package directed towards cricket, tennis and horse racing, as well as £25m new funding to support grassroots football.
Despite the Institute for Fiscal Studies predicting that total borrowing could top £400bn, the Office for Budget Responsibility still expects to see growth of 4% for 2021. Even though the economy will have suffered its deepest decline for three centuries, the UK economy is forecast to return to pre-Covid levels by middle of 2022.
If the announcement has left you wondering what it all means for your personal financial situation, we can always take a closer look. Please do get in touch if you would like to discuss anything in further detail.