The Chancellor of the Exchequer Rishi Sunak has announced that
the bill for addressing the coronavirus pandemic is currently £407bn, which is
equivalent to 10x HS2 projects or 20 Crossrail’s.
The key financial changes announced in the budget are as
The basic rate income tax threshold has been slightly increased from April 2021 to £12,570 from £12,500 and the high rate threshold to £50,270 from £50,000. The thresholds will then stay at these levels for the following 5 years.
The inheritance tax nil-rate band will remain at the existing level of £325,000 and also the residence nil-rate band of £175,000 until at least 2026. The residence nil-rate band taper will continue to start at £2 million.
The capital gains annual exempt amount has also been frozen at £12,300 until 2026.
Dividends also escaped. The tax-free dividend allowance has been kept at £2,000.
The pension lifetime allowance has also been frozen at £1,073,100 until 2026.
The state pension will however rise by 2.5% next tax year and the triple lock will remain in place.
The 0% stamp duty land tax holiday on the first £500,000 has been extended until 30 June 2021. The threshold will then be reduced down to £250,000 for a further 3 months and then return back to £125,000 from October.
Lenders have been withdrawing from providing low-deposit mortgages. Therefore to help first time buyers the government is guaranteeing 95% loan-to-value mortgages up to £600,000.
From April 2023 corporation tax will increase for companies with profits above £50,000. Tapering from 19% up to 25% above £250,000. This will affect the UK companies, but as it is progressive and can be offset by ‘super deduction’ on business investment as companies investing can benefit from a 130% first-year capital allowance.
IR35 changes delayed from last year will go ahead in April 2021. Companies must now collect income tax and NIC from the contractor’s fee and pay it over to HMRC.
The furlough scheme will be extended until October 2021. However, employers will be asked to contribute 10% in July and increased to 20% in August.
The trading loss carry-back rule has also been extended from the existing one year to three years.
The VAT reduction for the UK’s tourism and hospitality sector has been extended until October 2021 and reduced rate of 12.5% will then be applied until April 2022.
Business rate reliefs have also been extended to July 2021 and then a reduced rate of 66% until April 2022.