Today the Chancellor of the Exchequer, Rishi Sunak, set out the Government’s tax and spending plans for the year ahead. The Chancellor announced an extra £65billion in COVID support for employees and businesses, but also announced a freeze on income tax thresholds and a future rise in corporation tax to help pay back some of the UK’s rising debts, stating in Parliament that “this government is not going to raise the rates of income tax, national insurance or VAT. Instead our first step is to freeze personal tax thresholds”.
Key tax headlines from the Budget
- The Stamp Duty Land Tax (SDLT) ‘holiday’ has been extended – the temporary increase in the residential SDLT Nil Rate Band to £500,000 will be extended until 30 June 2021 (previously due to end on 31 March 2021). Between 1 July 2021 and 30 September the SDLT Nil Rate Band will be £250,000, on 1 October 2021 it will return to its usual level of £125,000.
- There would be no changes to the rates of income tax, national insurance or VAT.
- Personal income tax allowances are to be frozen at £12,570 from April 2022 to 2026 and the higher rate income tax threshold is to be frozen at £50,270 from 2022 to 2026.
- In April 2023, the rate of corporation tax will increase to 25%. The rate will be tapered so that only companies with profits of more than £250,000 will be taxed at the full 25% rate. Companies with profits of less than £50,000 will remain at 19%.
- No changes were announced with respect to inheritance tax or the lifetime pension allowance.
- No wealth taxes or Capital Gains Tax (CGT) increases were announced, despite the rumours in recent weeks and months.
- The Government will invest an additional £180 million in 2021/22 in additional resources and new technology for HM Revenue & Customs.
The extension to the SDLT holiday is welcome news for both home buyers and residential property investors, and is perhaps a reflection of the issues being faced in the market with the volume of individuals who were racing to complete before the original deadline to ‘lock in’ the saving.
After much discussion in the earlier part of the year of an increase in CGT rates and some suggestions that a new form of Wealth Tax would be introduced, neither were. These are both areas that we will continue to monitor and the release of tax consultations scheduled on 23 March 2021 perhaps will provide some insight as to where the government intends to go here.
Sean Bannister, Head of Tax, commented as follows:
“This year’s Budget was without real surprise, which was inevitable given how much of the content had been briefed to the press in the weeks immediately leading up to the event. The focus was dealing with the effects of the pandemic, and future tax rises to fund the deficit this has created. In news that will surely please a number of our clients who are in the midst of business sales, the much mooted change in the rate of CGT has not taken place, though this remains an area to keep under review. Whilst not expected to be introduced immediately, it was interesting to see that there was no indication that a Wealth Tax was being considered by the government at this stage.”
Please also view our Residential Property team response to the Budget.
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