To login into your personal finance portal click here Portal Login

Budget Roundup

19 Mar 2021

The challenges businesses and individuals have faced in recent months are unprecedented but – thankfully – the Chancellors Budget contained no major shocks.

The circumstances surrounding the 2021 Budget are nothing short of extraordinary. The challenges businesses and individuals have faced in recent months are unprecedented but – thankfully – the Chancellors Budget contained no major shocks.

This pandemic has a rather different dynamic compared to other economic downturns which the Government have tackled before. Normally the Government would tighten its belt, but in this instance Government measures are being relied upon to support the economy and hold it back from complete collapse. The repeated lockdowns have pushed Government spending to exceptional levels – unseen outside of wartime – the announced extension of this Covid-19 support until September will increase the scale of this spending further.

The question we are asking here at Generation Financial Services, is whether the measures announced by the Chancellor will be enough to sustain the UK’s economic and financial market recovery. The below gives a short rundown of the Budget.

Income tax

The Chancellor announced that the government will increase the Personal Allowance to £12,570 and the basic rate limit to £37,700. The higher rate threshold (the Personal Allowance added to the basic rate limit) will increase to £50,270 for 2021 to 2022.

The forthcoming changes to the Personal Allowance will apply to the whole of the UK. However, changes to both the basic rate limit and the higher rate threshold, will apply to non-savings, non-dividend income in England, Wales and Northern Ireland, and to savings and dividends income in the UK. Income tax rates and thresholds on non-savings, non-dividend income for Scottish taxpayers are set by the Scottish Parliament, not the UK Government.

Capital Gains Tax

The Capital Gains Tax annual exempt amount will remain at £12,300 for individuals, personal representatives and some types of trusts for disabled people and £6,150 for trustees of most settlements for the tax years until 2025 to 2026.

Inheritance tax

  • Nil-rate band to remain at £325,000
  • Residence nil-rate band to remain at £175,000
  • The residence nil-rate band taper will continue to start at £2 million

In short this means that qualifying estates can continue to pass on up to £500,000 with the qualifying estate of a surviving spouse or civil partner being able to pass on up to £1 million without an inheritance tax liability.

Corporation tax

The Government have introduced a small profits rate of 19% for financial year April 2023. The small profits rate will apply to profits of £50,000 or less.

Savings

  • The adult ISA annual subscription limit will remain unchanged at £20,000
  • The annual subscription limit for Junior ISAs will remain unchanged at £9,000
  • The annual subscription limit for Child Trust Funds will remain unchanged at £9,000
  • A new Green National Savings and Investment product is to launch, providing savers with an opportunity to invest in an environmentally conscious manner

State pension

The state pension will increase by 2.5% from 6 April 2021. For State pension recipients, who are entitled to the full level of new single-tier state pension their payments will increase by £4.40 per week from 6 April 2021.

Lifetime pension allowance

The pensions lifetime allowance has been frozen at £1,073,100 until April 2026. This doesn’t stop you savings, you can still save as much as you want to in your pension during your working life – but if it exceeds a total amount (the lifetime allowance), you could face a tax charge when you come to access this money.

If you would like to know what these changes mean for your personal savings and investments, get in touch with one of our experts.

Share this Case Study