Legislation & Financial News

Wealth Management - Budget 2021, what you need to know

As has been the case over recent years, the Budget held little surprise when it came to personal finances. Many of the headline announcements conveniently appeared in the press in the last few days in any event so as expected, we saw little change of any significance.

The Chancellor stuck to the Budget he had alluded to when interviewed over the weekend on the Andrew Marr show. The key announcements relate to supporting the economy. From a personal tax point of view, he stuck with the Conservative election manifesto promise not to increase the rates of Income tax, National Insurance and VAT.

There were some tweaks to allowances in this Budget but there is little doubt that, at some stage, the UK needs to have a plan for raising more tax. There is a raft of consultations due at the end of this month which may give an indication of what some of those measures may be in due course.

Much of the Budget detail is contained in the publications issued once the Chancellor has sat down and our team of experts will carefully cast their eye over this and on Friday we will share a more comprehensive look at how these changes may effect you.  In the meantime, we have summarised below the key announcements relevant from a personal tax and investing perspective.

3rd March 2021


Savings and Investments

Individual Savings accounts

Individual Savings Account (ISA) annual subscription limit – The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.

Junior ISA and Child Trust Fund annual subscription limit – The annual subscription limit for Junior ISAs and Child Trust Funds for 2021-22 will remain unchanged at £9,000.

Green gilts and retail savings product

In November 2020, the Chancellor announced the Government’s intention to issue its inaugural green gilt in 2021. The Budget announced further details and confirmed the issue of this first green gilt will take place in the summer, with a further issuance to follow later in 2021.

The Government will also offer a green retail savings product through NS&I in the summer of 2021. This product will be closely linked to the UK’s sovereign green bond framework and will give all UK savers the opportunity to take part in the collective effort to tackle climate change, benefiting from the innovative reporting standards planned for the green gilt programme. The announcement did not provide any further details or the interest rate they will offer.


Tax allowances and rate bands
  • The personal allowance and basic rate band for Income tax will increase from April 2021 to £12,570 and £50,270 respectively as previously announced. These will then be frozen at these amounts until April 2026
  • National Insurance Contributions Primary Threshold for employees will increase from April 2021 to £9,568 and the Upper Earnings limit will rise to £50,270. The Upper Earnings limit is in line with the income tax higher rate band and will be frozen until 2026, but other thresholds will continue to be considered each year
  • Inheritance Tax Nil Rate Band to be frozen at £325,000 and the Residence Nil Rate Band frozen at £175,000 per person until April 2026
  • Capital Gains Tax Annual Exemption to be frozen at £12,300 for individuals and up to £6,150 for trusts until April 2026
  • Pensions Lifetime Allowance to be maintained at its current level of £1,073,100 until April 2026.

Residential Property
  • Stamp Duty Land Tax (SDLT) extension – The Government will extend the temporary increase in the residential SDLT Nil Rate Band to £500,000 until 30 June 2021. From 1 July 2021, the zero-rated band will reduce to £250,000 until 30 September 2021, when it will then be reduced further to £125,000 on 1 October 2021
  • 30 Day Reporting – with the extension of the SDLT holiday and the new mortgage guarantee scheme, this will help to keep the property market moving. As a result, it is important to bear in mind the 30-day capital gains reporting for the sale of residential properties that was introduced in April 2020. To give an overview of this, a return is required to be submitted and the Capital Gains Tax liability paid within 30 days of completion
  • Mortgage Guarantee Scheme – As of April 2021, the Government are introducing a new mortgage guarantee scheme. The scheme provides a guarantee to lenders across the UK who offer mortgages to individuals with a deposit of just 5% (for homes with value up to £600K). These low deposit mortgages will help first time buyers to get onto the property ladder.

Tax Administration
  • HMRC plan to reform the penalties for late submission and late payment of tax for VAT and Self Assessment.  This will likely be via a points-based system, which is set to effect VAT taxpayers from 1 April 2022, Self Assessment for the self-employed or landlords with over £10,000 of income per year from 6 April 2023, and other Self Assessment taxpayers from 6 April 2024
  • The Government will invest over £100 million in a Taxpayer Protection Taskforce of 1,265 HMRC staff to combat fraud within COVID-19 support packages, including the Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme
  • The Government is looking to strengthen existing anti-avoidance regimes and tighten the rules designed to tackle promoters and enablers of tax avoidance schemes.

Summary

The Budget held few surprises and as expected, there were no big immediate tax rises announced. Although we are not able to predict the future, we can say with some certainty however that action will need to be taken at some point to tackle the huge public sector debt and this will inevitably lead to tax rises in the years to come.

Our aim at Old Mill is to help you focus on longer-term planning, and our regular reviews ensure that any changes to your personal circumstances or indeed financial changes such as those in the Budget are taken into account and your financial affairs adjusted accordingly.

If you have any questions about how the Budget affects you personally, please speak to your Old Mill financial planner or click here…