Today (3rd March) the Chancellor of the Exchequer, Rishi Sunak, announced the government’s spending and taxation plans for the coming year.
Besides various measures announced to combat the economic impact of the “coronavirus”, the Budget covered everything from changes in welfare to changes in personal finance (which I have focused on in this post).
If you have any questions about how these new measures could benefit you or your family please do not hesitate to Contact us.
- The personal allowance – the amount you can earn before paying income tax – will rise from £12,500 to £12,570.
- The higher rate allowance – the amount of taxable income you can earn before paying higher-rate income tax – will go up by £200, from £37,500 to £37,700. For most people, this will mean you won’t start paying higher rate income tax unless you earn more than £50,270.
- The capital gains tax allowance will be frozen at £12,300 for individuals
- No changes were announced.
- The nil rate band and residence nil rate band will both be frozen at their current levels of £325,000 and £175,000 per person (respectively)
- It was rumoured that inheritance tax could be changed to make it less complicated, which could have included changes to gift rules, treatment of life insurance policies not held in trust, and combining the two nil rate bands into a single allowance. None of these changes took place.
- The most significant announcement was that the lifetime allowance – the total value of pension savings one can build up without facing tax penalties – will no longer be increased each tax year. In previous years this allowance had been increased in line with inflation. It will be frozen at £1,073,100
- No changes were announced to higher-rate income tax relief on pension contributions. It was rumoured that higher-rate relief could be abolished in favour of a flat rate of relief.
- The Department of Work and Pensions announced it has found historic shortfalls in state pension payments made to some women. These shortfalls will be addressed, at a cost of £3bn.
- The stamp duty cut, which was due to expire at the end of March 2021, will be extended until the end of June 2021.
- This means until the end of June 2021, property transactions (for primary residences) worth less than £500,000 will not be liable to stamp duty
- Then from July 2021 to September 2021 (inclusive of both months) the limit will be £250,000
- Then from October 2021 the limit will return to its usual amount of £125,000
- A new government guarantee will make it easier for people to borrow up to 95% of the value of a house
- This means it will be easier to buy with a lower deposit
- The new mortgage products will be available from April 2021
- The furlough scheme will be extended until September 2021
- From July 2021, the government will contribute 70% of staff wages, and employers will have to pay 10% for hours their employees do not work.
- In August and September, the government will pay 60% while employers will pay 20%
- The government also announced a further two grants for the self-employed, running until September 2021
- Corporation tax – tax on the company profit – will increase for companies which make more than £50,000 of profit. The rate will gradually rise from its current level of 19% to 25% by 2023. Companies which earn between £50,000 and £250,000 of profit will see a rate somewhere between 19% and 25%, by applying “marginal relief”, but details have not yet been announced.
Savings and Investments
- The ISA limits will be frozen at their current levels (£20,000 for adult ISAs and £9,000 for Junior ISAs per year
- A new product, which will be available from National Savings & Investments, was announced. It was referred to as a “green bond” but no further details will be released until summer 2021.
Our local area
- It was a significant budget four our local area. The government announced Teesside will become one of 8 “freeports” in the UK, which is a special area with simplified customs to facilitate trade and production of goods. This is expected to bring investment and jobs to our local area.
- The government also announced a new civil service hub in Darlington. This part of the government’s “levelling up” plans, which aim to increase investment in areas such as the North East.