We are not going to cover everything that the Chancellor announced as there are plenty of articles on the details, but here are our edited highlights:
Personal Tax and Allowances
- Your Personal Allowance (the amount you earn before you start paying tax) has increased very marginally by £70 from £12,500 to £12,570. In reality, you aren’t going to notice the difference
- The lowest rate tax band has also increased marginally – from £37,500 to £37,700 – again no noticeable difference
- Higher rate tax bands, savings bands and dividend income remain unchanged
- National Insurance rates also remain unchanged
- Pensions Lifetime Allowance – the annual link to inflation has been removed for the next five years, so the allowance will be capped at £1,073,100 until 2026
- Capital Gains Tax and Inheritance Tax – no change
Crucially, the Chancellor announced that the Personal Tax Allowances would now be frozen, which in real terms means a reduction, because of the rate of inflation and the increased cost of living.
Other Domestic Implications:
- Duty on fuel, alcohol and tobacco – stay the same
- Contactless card limits – legally increased to £100 but it is up to banks to implement this
- Stamp Duty – the holiday has been extended to 30 June, and will then have a tapered re-introduction – the nil rate band is reduced from £500,000 to £250,000 until 30 September, when it will return to the original limit of £125,000
- ISA allowance – unchanged
- Mortgage guarantee scheme – a new scheme to guarantee mortgages for borrowers with a 5% deposit and to fix interest rates for at least five years. This scheme is available until 31 December 2022, and is designed primarily for first time buyers
This is where the big changes happened…
- Corporation Tax – the existing 19% rate will remain in place for the next two years. From April 2023 there will be a tapered rate – 19% on profits up to £50,000 increasing to 25% on profits over £250,000
- Job Retention/Furlough Scheme – this will continue as is until 30 June. Employers will then be expected to increase their contribution, while the Government will pay 70% for July, reducing to 60% for August and September. It is compulsory for employers to make up the difference to 80% for all employees up to a cap of £2,500
- Reduced VAT for hospitality and leisure – the 5% VAT will be extended until 30 September. It will then increase to 12.5% from 1 October to 31 March 2022
- Apprenticeships – the Government is increasing the payment to £3000 for employers taking on apprentices before 30 September 2021
- Super-Deduction – there is an allowance of 130% for plant and machinery purchased before 31 March 2023 – but this is not straightforward so please seek advice
- Mileage allowances – business use in personal cars – remains unchanged
This is just a snapshot of the headlines, and there are further changes. There are also nuances to some of these changes.
Please contact your accountant for business tax implications, and talk to us if you would like to know how these changes may affect your personal financial plans – 01344 875 310.