Budget 2021/2022 Quick Summary
With vaccination programmes truly underway, there is hope that the impact of the pandemic will continue to subside. Many had valid fears that the Government would hike taxation to make up for the huge spending bill it has incurred from the pandemic.
Initially allaying fears over hefty new tax bills, Rishi Sunak repeated his message from the previous budget, stating that the treasury will continue to do ‘whatever it takes’ to get the economy back on its feet. The budget included a strong message that now is not the time for tax increases, which would take the wind out of the sails of an already battered economy.
One particular area that looked set to change was Capital Gains Taxation due to a new report by the Office of Tax Simplification requested by the treasury. Although these changes have not been implemented yet, they may be in the near future. It may be worth reading our article on the recommended changes to Capital Gains Taxation if you have significant gains to pay in the future.
Despite little in the way of immediate tax increases, corporation tax is set to rise for all but the smallest businesses from 2023 and many personal tax allowances will be frozen until 2026. The effect of these freezes will grow over time, as inflation means that the real value of the personal allowances will decrease, and wage increases will push people into paying a larger proportion of their income in tax.
The budget included a suite of other policies and spending commitments in an attempt to help the economy through the dual impact of Covid-19 and Brexit. Firstly, the government is extending several of its lifelines of support, including furlough, support for self-employed workers, the temporary £20 per week uplift in universal credit and maintaining the temporary VAT rate of just 5% for the struggling hospitality industry.
The treasury is also set to establish a new economic campus in Darlington and support a new infrastructure investment bank in Leeds, which will invest in both public and private projects to finance a ‘green industrial revolution’. What this ‘revolution’ will consist of is as yet unclear, aside from funding for new infrastructure to support ‘next-generation’ offshore wind projects in Teesside and Humberside.
Other announcements included the establishment of eight freeports up and down the UK, with special rules such as reduced tax rates to make it cheaper and easier to do business. Businesses will also welcome a 130% ‘super-deduction’ on new business investment, allowing companies to claim a tax cut of 25p for every £1 they invest before April 2023.
Here is a summary of changes you may wish to take note of for 2021/2022:
- The personal Income Tax allowance will rise to £12,570 and the higher rate threshold will be £50,270 for 2021/22
- The National Insurance Contributions upper earnings limit and upper profits limit will remain aligned to the higher rate threshold at £50,270 for 2021/22
- The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to 30 June 2021 and then replaced by a £250,000 exemption until 30 September 2021.
- The Capital Gains Tax annual exemption, Inheritance Tax rate nil rate bands and Pensions Lifetime Allowance have been frozen until April 2026.
- The ISA annual subscription limit for 2021/22 will remain at £20,000 and the corresponding limit for junior ISAs (JISAs) and child trust funds (CTFs) will stay at £9,000.
- For two years from April 2021, companies investing in qualifying new plant and machinery will benefit from a 130% first-year super-deduction.
Please find below, a link to download our Tax Tables for the 2019/20 and 2020/21 tax years, updated with the announcements made by the Chancellor.
If you have any questions about the contents of the Tax Tables or how any aspects of your tax and financial planning may be affected by the Budget, please reply to this email or call us on 01582 461122.
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