Menu

5 key takeaways from the 2021 Budget and what they mean for you

Posted on

Back in March 2020, Rishi Sunak’s first Budget as chancellor outlined a package of coronavirus support measures costing an estimated £30 billion.

Fast-forward a year, and government spending to shore up the economy in the wake of the pandemic will shortly exceed £300 billion. In his second Budget speech, the chancellor walked a fine line between continuing to support individuals and businesses through the crisis, while also taking his first steps to plugging the black hole in the public purse.

Here are five key takeaways from the Budget and what they mean for you.

1. Personal tax freezes are a “stealth tax”

While the chancellor may have been able to meet his manifesto commitment that he wouldn’t raise Income Tax or National Insurance contributions (NICs), he did scrap a planned rise in both the Personal Allowance and higher-rate tax thresholds.

From 6 April 2021, the level at which you start paying Income Tax will rise from £12,500 to £12,570 and the level at which you pay the higher rate of tax will rise from £50,000 to £50,270.

These will then be frozen until 2026 rather than rising every year during this parliament as previously planned.

This freeze means that, if your earnings rise over the next few years – perhaps by the cost of living or more – you’ll end up paying more tax than you would have if the allowances had risen in line with inflation.

It’s a clever way to raise revenue as you don’t lose any income; instead, you don’t get as much as you otherwise would have.

2. ISA allowances remain generous

In the small print of Rishi Sunak’s speech, the government confirmed that the ISA allowances would remain at the same levels in the 2021/22 tax year. This means you can contribute:

  • £20,000 to an adult ISA
  • £9,000 to a Junior ISA or Child Trust Fund.

The £4,000 annual Lifetime ISA limit also remains (this forms part of your overall £20,000 ISA subscription limit).

If you have a child or grandchild under the age of 18 you can save or invest up to £29,000 in the 2021/22 tax year and benefit from tax-efficient returns.

3. Government support remains until September

One of the more unexpected announcements the chancellor made was to extend the Job Retention (“furlough”) scheme until September 2021.

The government will cover the wages for workers who have been put on leave due to the pandemic (up to a maximum of £2,500 a month) at the following rates:

  • 80% until the end of June 2021
  • 70% in July 2021
  • 60% in August and September 2021.

Employers will have to pay 10% of wages in July and 20% in August and September.

Sunak also announced that the fourth Self-Employed Income Support Scheme (SEISS) grant for February, March, and April 2021 will cover 80% of monthly profits up to a maximum of £2,500 a month.

He also confirmed that people who became self-employed in the 2019/20 tax year, and have filed a 2019/20 tax return, will also be eligible for the fourth and fifth grants. This will benefit around 600,000 workers.

A fifth grant, covering May, June and July 2021 will also be available and the amount will depend on how seriously the pandemic has affected turnover.

  • Self-employed workers whose turnover has fallen by 30% or more will continue to receive 80% of monthly profits up to £2,500 a month.
  • Self-employed workers whose turnover has fallen by less than 30% will receive 30% of monthly profits up to £2,500 a month.

The chancellor also outlined a range of support measures for the retail, hospitality, and leisure sectors. Non-essential retail businesses will receive grants of up to £6,000 per premises, while hospitality and leisure businesses will receive grants of up to £18,000.

There will also be an extension to the temporary 100% business rates relief for hospitality, retail, and leisure until the end of June with a two-thirds discount on rates for the rest of 2021.

The chancellor also extended the temporary VAT reduction in these sectors from 20% to 5% until 30 September following which there will be an interim 12.5% VAT rate until April 2022.

4. Freezes to tax allowances and exemptions are a wealth tax in all but name

The chancellor announced he was freezing three significant tax allowances and exemptions until 2026:

  • The Lifetime Allowance – the amount you can save into a pension before incurring tax charges – will remain at £1,073,100.
  • The Inheritance Tax (IHT) threshold will remain at £325,000 with the “residence nil-rate band” at £175,000.
  • The annual Capital Gains Tax (CGT) exemption will remain at £12,300.

These are also stealth taxes because, while they may not affect many people immediately, thousands will be impacted in real terms as time goes on.

For example, if your pension savings grow over the next five years and exceed the Lifetime Allowance amount, you could face a levy of up to 55% on any additional lump sums or income taken from your pension pot.

Further, as the value of assets such as house prices and investments rises over the next five years, the CGT and IHT freeze will see more people face a tax liability, raising additional revenue for the Exchequer.

If you’re worried about paying too much tax, taking professional financial advice can be hugely beneficial.

5. If you run a business, it’s time to invest

As with many Budgets, it’s often the case that the chancellor giveth with one hand, and taketh away with the other. So, while the rate of Corporation Tax might rise by six points in 2023, he did announce “the biggest business tax cut in modern British history”.

A new “super-deduction” will come into force on 1 April 2021 and last until 31 March 2023. This means that, when companies invest, they can reduce their tax bill by 130% of the cost of the investment.

Sunak gave the example of a firm currently spending £10 million on equipment. At present they benefit from a £2.6 million tax reduction but, under the super-deduction they would get a tax break worth £13 million.

The Office for Budget Responsibility estimates it could boost business investment by 10%.

Get in touch

Freezes on allowances and tax exemptions could have a significant knock-on effect on your finances in the coming years. To find out how we can help you, please get in touch. Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.

Please note

This blog is for general information only and does not constitute advice. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation which is subject to change.

The information is aimed at retail clients only.

 

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.






    Subscribe to our newsletter