Budget 2021 – further tax analysis

We summarise the main tax policy announcements.

The government’s Spring 2021 budget was announced yesterday by the Chancellor. There had been an expectation that the budget might introduce significant reform to personal and capital taxes, however there are relatively few changes to report.

Personal Tax

Income Tax and National Insurance

• There will be no changes to rates of income tax and national insurance.
• The personal income tax allowance is to be uprated as planned in April 2021 to £12,570 but will then be frozen until 2026.
• The higher rate income tax threshold will also be uprated in April 2021 to £50,270 but will be frozen until 2026.
• The threshold at which National Insurance contributions are paid will rise to £9,568.

Capital Gains Tax (CGT)

• The annual exempt amount will remain the same until April 2026.  This will therefore be frozen at £12,300 for individuals, personal representatives and some types of trusts, and £6,150 for most trusts.

Inheritance Tax (IHT)

• Although significant reforms are expected to IHT at some point in the future, there were no announcements made.
  • The nil-rate band remains at £325,000 and will be frozen until April 2026.
  • The residence nil-rate band also remains frozen at £175,000 until 2026.

Stamp Duty Land Tax (SDLT)

• The SDLT holiday was introduced in July 2020 as a response to Covid-19 and has meant that the level at which homebuyers start to pay SDLT is £500,000.
• This was due to end on 31 March 2021 but has now been extended until 30 June 2021.

Business Tax

Corporation Tax

• Corporation tax will remain at 19% until 2023.
• In April 2023, corporation tax will rise to 25% on profits over £250,000.
• The rate will remain at 19% for smaller companies with profits of less than £50,000.
• There will be a tapering margin rate in place for companies with profits between £50,000 and £250,000.