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
Inflation in the UK jumped to 3.2% in August from 2%, its highest level in more than nine years. The Office for National Statistics said that much of the spike was due to a substantial drop in restaurant and café prices last year and meaningful increases this year. The RPI which includes housing costs also jumped to 4.8% from 3.8%.
The US Senate passed a roughly USD 1 trillion bipartisan infrastructure package, including about USD 550 billion in new spending. This is aimed at rebuilding traditional transportation infrastructure, improve access to broadband internet in rural areas and upgrade the electric grid and water systems. The Senate Democrats also approved a USD 3.5 trillion budget resolution.
China released a five-year blueprint calling for increased regulation affecting key parts of the economy. The document signalled Beijing’s intention to draft new laws covering national security, technology, monopolies and education. In the technology sector, new legislation will cover areas such as online finance, artificial intelligence, big data and cloud computing.
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.
Last month America’s consumer prices inflation rate rose to 4.2% from 2.6% and this is before the full effects of the Biden stimulus plans take affect. Eurozone inflation accelerated to1.6% year-on-year in April, up from 1.3% in March, following a sharp rise in the cost of energy compared to the height of the pandemic. UK annual inflation meanwhile more than doubled in April to 1.5% from 0.7% in March, although both remain below central bank target rates of 2% for now.
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.
The Senate finally passed a budget resolution moving forward legislation authorising the $1.9 trillion stimulus the President requested. This takes the amount of the global stimulus to above $22 trillion.