The US consumer price index (CPI) jumped 0.9% in October, well above
consensus expectations of around 0.6%. The increase brought the year-over-year
CPI increase to 6.2%, the highest since December 1990. The U.S. Producer Price Index (PPI) also
came in up 8.6%, year-over-year.
the U.S., the latest inflation data paint a similar picture. Eurozone PPI
inflation is running at 16%. Japan’s PPI clocked in at 8%, yet another 40-year
high, and China’s at 13.5%, a level last seen in the mid-1990s. South Korea’s
import prices are rising at 35.8%, the fastest rate since 2008.
current inflation increasingly appears neither transitory nor local.
chancellor focused on the post covid recovery and did not tinker much with
pensions and investments.
measure that we already knew about was the 1.25% increase to National Insurance
and Dividend rates which will come into effect in April 2022. Due to Government
IT constraints it will initially be collected via NI and in April 2023 it will
be a separate tax called the ‘health and social care Levy’.
This Levy will
be applied if your pay is above the primary earnings threshold of £9,568. You
are caught if you pay yourself dividends above £2,000, and if you are working
above the State Pension age.
Therefore the dividend ordinary rate, upper rate and additional
rate will increase to 8.75%, 33.75% and 39.35% respectively.
For business owners the employer NI will also rise 1.25% to 15.05%. As
corporation tax will rise in April 2023 it would be prudent to talk to your
accountant to bring forward profits if possible.
Key allowances have not changed:
- High rate income tax band starts at £37,700 + £12,570 =
- Capital Gains Tax annual exempt amount is £12,300
- ISA annual subscription limit is maintained at
£20,000 and JISAs £9,000
The European Central Bank (ECB) revised its forward guidance, indicating it would keep interest rates “at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term.” The ECB indicated that this process could involve a short period in which inflation goes moderately above this target.
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
Dividends also escaped. The tax-free dividend allowance has been kept at
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
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
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
Business rate reliefs have also been extended to July 2021 and then a reduced
rate of 66% until April 2022.
Chancellor, Rishi Sunak, has announced a range of measures to try and kick-start the economy.
The big story is a cut in VAT for the hospitality sector from 20% to 5% and this will apply to eat-in or hot takeaway food from restaurants, cafes and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, attractions like cinemas, theme parks and zoos.
He also announced a temporary stamp duty holiday until January 2021 to stimulate the property market. This would exempt the first £500,000 of all property sales from the tax.
government will pay businesses a £1,000 bonus for every staff member that is kept
on for three months when the furlough scheme ends in October. To qualify, the
employee must be paid at least £520 on average, in each month from November to
the end of January.
New schemes were announced to boost employment and training opportunities for 16 – 24 year olds. This includes a ‘Kick Start’ scheme to assist those at risk of long term unemployment by funding six-month work placements to those on universal credit. Further support will be provided to young people in England: funding of £1,000 for each new work experience place; for apprenticeships – funding of £2,000 for each new apprentice aged under 25, and £1,500 for each new apprentice aged 25 and over, from 1st August 2020 to 31st January 2021. The apprenticeship payments will be in addition to the existing £1,000 funding that is provided for young apprentices.
was also a scheme announced that will be launched in August to give 50% off to
people dining out. The scheme will mean 50% off meals eaten at any
registered business between Monday to Wednesday in August, up to a maximum
discount of £10 per head (including children).
UK Chancellor of the Exchequer Rishi Sunak pledged an additional GBP 30 billion to support employment, on top of the GBP 133 billion in coronavirus measures he has already unveiled. The money includes over GBP 5 billion in accelerated infrastructure spending, about GBP 9 billion for employers to retain workers through the end of January, funds for home insulation, and help for homebuyers and for hospitality firms.
The UK base rate is cut to an all-time low of 0.1% and the Bank has also announced an emergency £200bn of bond buying.
The Bank of England has announced an emergency unscheduled 0.5% cut in
the bank rate.
The interest rate cut is part of a series of a comprehensive and timely package
of measures to help UK businesses and households bridge across the economic
disruption that is likely to be associated with Covid-19.
UK house prices fell by 0.1 per cent last month taking growth
over the year to only 0.9 per cent, according to the latest monthly survey of
the property market by Halifax. The slowdown means that prices rose at their slowest
annualised rate this year and the cost of an average house this month stands at
£232,249, the Halifax said.
Tesco has pulled out of the mortgage market amid a price war among lenders that has pushed
down rates for borrowers and piled pressure on smaller providers. The 23,000
mortgage customers of the supermarket’s banking business will not see any
immediate change to existing arrangements.