What Does the UK Budget 2021 Mean for Your Money?
Rishi Sunak has delivered the UK Budget 2021, with a range of measures to support the UK economic recovery. Find out what the Budget 2021 revealed, as Jeff Casson, True Potential Chief Investment Officer, provides commentary and analysis on what Budget 2021 will mean for markets and investors.
Inevitably, many of the Chancellor’s announcements were part of a support plan regarding Coronavirus. The key points were:
- Furlough to be extended until the end of September
- A further £1.6 billion in funding will be provided to continue rollout of Coronavirus vaccines and improve future preparedness
- Government to continue paying 80% of employees’ wages for hours they cannot work
- Employers to be asked to contribute 10% in July and 20% in August and September
- 600,000 more self-employed people will be eligible for help as access to grants is widened
- £20 uplift in Universal Credit to be extended for another six months
- Minimum wage to increase to £8.91 an hour from April
In terms of a road to recovery for the economy, Sunak announced that the UK economy is forecast to return to pre-Covid levels by the middle of 2022, with annual growth set to rebound by 4% this year, followed by 7.3% growth in 2022.
In regards to Taxation, there will be no changes to rates of Income Tax, National Insurance or VAT.
The following have been frozen:
- Personal Income Tax Allowance frozen at £12,570 from 2022 to 2026.
- Higher Rate Income Tax frozen at £50,270 from 2022 to 2026.
- Pension Lifetime Allowance frozen at £1,073,100 until April 2026.
The Budget 2021 did announce one substantial change to taxation, with Corporation tax on company profits rising from 19% to 25% in April 2023.
The Chancellor said “This new higher rate won’t take effect until April 2023, well after the point when the OBR expect the economy to have recovered “. However, the rate will stay at 19% for about 1.5 million smaller companies.
In another substantial announcement for businesses, for the next two years, when companies invest, they can reduce their tax bill by 130% in a super deduction. “This will be the biggest business tax cut in modern British history”.
The struggling housing market was also addressed during the Budget 2021 speech, where it was announced that 95% mortgages will be guaranteed by the government as part of plans to turn“generation rent into generation buy”.
Mr Sunak said that “this is a policy that gives people who can’t afford a big deposit the chance to buy their own home”.
Other Budget 2021 announcements are as follows:
- Incentive grants for apprenticeships to rise to £3,000 and £126 for traineeships
- VAT cut for hospitality firms to be maintained at 5% until September
- Interim 12.5% rate to apply for the following six months
- Business rates holiday for firms in England will continue from April until June
- £5 billion in re-opening grants for non-essential businesses of up to £6,000 per premises
- The establishment of 8 new freeports, which may make trade in the UK easier
Planned increases in duties for spirits, wine, cider and beer are cancelled, with all alcohol duties frozen for a second year in a row. Fuel duty will also be frozen.
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