The Budget 2021 – A Summary
The Budget saw a raft of announcements affecting people and businesses alike, but it was what the Chancellor didn’t do rather than what he did do which is likely to have the biggest impact on individuals.
Below we have summarised the key points that derived from the budget this year, some of which may have taken you by surprise.
Other than an increase in personal allowance for this current tax year 2021/22 to £12,570 and the increase of the higher rate income tax threshold to £50,270, most other personal tax rates and thresholds remain the same, and will be frozen until 2026.
This means that when inflation is factored in, in real terms income will reduce. And as wages rise – even in line with inflation – more people will become higher rate tax payers.
The threshold at which inheritance tax (IHT) applies was due to rise in line with inflation but has instead been frozen at the current rate of £325,000, along with Capital Gains Tax which has been frozen at the current rate of £12,300. The Pension Lifetime Allowance, currently at £1,073,100, will also remain unchanged until 2026.
Despite the freezing of IHT, there are still a number of estate planning opportunities that can be utilised to help keep more of your estate in the hands of your loved ones.
Tax planning is an important part of the financial planning process. Making use of use of the tax free allowances available, particularly the annual pension allowance for higher rate tax payers, is just one of the areas that we monitor and if necessary, discuss with you during your annual review. Other allowances include the annual ISA allowance of £20,000 and annual gift allowance of £3,000 – you can read more about this here in our blog on end of year tax planning.
There remains a bonus ISA allowance for anyone aged 16 or 17. These teenagers have the best of both worlds, as they can use their £9,000 annual Junior ISA allowance and they can also open an adult cash ISA (£20,000 limit). Food for thought, when considering how generous to be to your children and grandchildren!
The Stamp Duty holiday on house purchases in England and Northern Ireland has also been extended to the 30 June 2021 meaning that there will be no Stamp Duty on property sales of less than £500,000 (bear in mind that if you are purchasing an additional property, the 3% surcharge still applies).
We hope that you found this summary useful and if you have any queries regarding any of the areas mentioned above, please do not hesitate to contact us.