In what has to be one of the most eagerly anticipated Budgets in decades, Rishi Sunak continued with his promise to “do whatever it takes” to tackle the ongoing pandemic and outlined his three point plan to protect jobs and strengthen public finances.
- Support businesses and families through the pandemic;
- Focus on investment-led recovery as the UK emerges from lockdown; and
- Consider future changes to strengthen the public finances.
As had been heavily anticipated, the Chancellor announced extensions to the Coronavirus Job Retention Scheme (CJRS) and Self Employment Income Support Scheme (SEISS), both of which will now run until the end of September 2021. It was also confirmed that the SEISS is to be widened such that qualifying new businesses, which commenced after 5 April 2019, will now be able to apply for the 4th and 5th SEISS grants.
Although many of the Chancellor’s announcements were aimed at supporting businesses, measures designed to assist individuals were also confirmed including:
- National Living Wage increased to £8.91 from April 2021;
- A six-month extension of the £20 per week Universal Credit uplift, with eligible Working Tax Credit claimants receiving a one-off payment of £500;
- A freeze on all alcohol duties; and
- Fuel duty to be frozen for the eleventh consecutive year.
Additional measures were announced to support the housing sector. These were:
With many calling for an extension to the Stamp Duty holiday on residential property, the Chancellor confirmed that the current £500,000 nil rate band would be extended until the end of June 2021. This would be replaced with a £250,000 nil rate band on 1 July 2021, before returning to the previous £125,000 from 1 October 2021.
The Chancellor confirmed details of the Government-backed new mortgage guarantee scheme aimed at helping first-time buyers and home movers with a minimum 5% deposit.
As expected, the Chancellor also announced measures aimed at starting the process of repaying the unprecedented levels of government borrowings and repairing the damage done to the economy by the pandemic.
Despite ongoing rumours anticipating reforms to the Capital Gains Tax and Inheritance Tax regimes, neither featured in the Chancellor’s speech or the associated publications released on Budget day.
In fact, the announcements made in relation to ‘tax increase’ were not as severe as many had feared with the two main measures focusing on an increase in the rate of Corporation Tax from 2023 and the freezing of a variety of personal tax reliefs and allowances until 2026.
The main rate of Corporation Tax will rise from 19% to 25% in April 2023.
The Chancellor stuck to the manifesto promise not to increase Income Tax, National Insurance or VAT. However, he did announce that the 2021/22 Personal Allowance of £12,570 and higher rate tax threshold of £50,270 would be kept at these levels until April 2026. Although this will not see a direct increase in an individual’s overall tax liability, it is a sustained move away from the previous practice of increasing the annual thresholds.
In keeping with his wish to be seen as the ‘honest’ Chancellor, having stated that nobody’s take home pay would be less than it is now, Rishi Sunak did clarify that “this policy does remove the incremental benefit created had thresholds continued to increase with inflation.”
Inheritance Tax (IHT) and Capital Gains Tax (CGT)
Similarly, the Chancellor announced that there will be no changes to IHT or CGT allowances.
The CGT annual exemption will remain at its current rate of £12,300 until April 2026.
The IHT Nil Rate Band and Residence Nil Rate Band, which had been expected to increase in line with CPI in April 2021, will remain at £325,000 and £175,000 respectively until April 2026.
Although not included in the budget speech itself the following additional measures were announced:
- Confirmation that the temporary Income Tax and National Insurance Contribution exemptions for home-office expenses, which apply to individuals who are working from home due to the coronavirus outbreak, will be extended by 12 months 5 April 2022.
- The limit on a single payment using contactless card technology will rise to £100 later this year.
And finally, whilst the announcements made in the Budget largely focused on the support being provided by the Government to help individuals, businesses and the economy address the ongoing effects of the pandemic. Many will now be turning their attention to the 23rd of March, “Tax Day”. This is the day on which the treasury will publish documents and consultations that have traditionally been released on Budget day. These publications are likely to give greater insight into how the Government intends to repay the hundreds of billions borrowed.