Spring Budget 2021 – Summary Statement
The Chancellor Rishi Sunak delivered his second budget on the third of March 2021.
There was an emphasis on broad economic recovery, to protect jobs and the livelihood of British people, with the message that the national debt must be managed well.
These are some of the key points:
Protecting jobs, business and the economy
After a difficult year, the Chancellor’s top priority is to inject money where it can best be spent to safeguard the UK’s economic ability to recover.
The furlough scheme has been extended until September, and 2 new rounds of grants have been given to the self-employed.
An extension to the business rates holiday in England has been granted to retail, hospitality and leisure businesses, and there will be no immediate rise in corporation tax, although bigger companies will be paying a higher rate of 25% in 2 years’ time (it’s currently 19%).
To give a boost to investment, there will be a 130% deduction for companies investing in qualifying new plant and machinery, to encourage businesses to invest into capital equipment.
There will also be new free ports around the UK, with 8 locations in England.
A new infrastructure bank in Leeds will be created, with an expectation that £40bn will be invested in long term projects.
The Green economy also got a boost, with retail investors having opportunities to invest in ‘greener’ National Savings.
Increased public debt
Public debt has massively increased due to the fiscal response to Covid. The ratio is expected to peak at 98% of GDP in 2023 – the highest ever in peacetime. This puts the economy at the potential mercy of interest rates and inflation, with the UK’s bill spiralling quickly if interest rates go up, which may be needed to keep future inflation under control.
Little change to Taxation
A number of tax threshold limits – including Inheritance tax relief, Capital Gains Tax, pensions Lifetime Allowance and the income tax personal allowance were frozen for 5 years. This effectively means higher taxation in real terms over coming years.
Housing and Mortgages
Other measures include extending the housing Stamp Duty holiday until June with further partial relief until September, and a new mortgage guarantee scheme for first time buyers which will drive the offer of 95% mortgages.
The nil rate band (£325,000) and the residence nil rate band (£175,000) will remain at existing levels until April 2026.
It’s also worth noting that more resources will be focussed on tax evasion – in particular in relation to Inheritance Tax, where the need to consider lifetime transfers is sometimes overlooked.
For information only. Always seek professional advice before acting.
Inheritance Tax Planning is not regulated by the Financial Conduct Authority.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
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