As with his first almost a year earlier, Rishi Sunak’s second Budget as Chancellor was understandably overshadowed by the impact of COVID19, with several existing measures extended, and new ones introduced, to address the continuing economic impact. Consequently, the number of tax-related proposals announced was again less than would historically have been expected.
Perhaps the most notable point concerns the freezing of several key allowances and rate thresholds, which, given the lack of inflationary uprating, represent effective tax increases. However, the feared alignment of rates of Capital Gains Tax (CGT) with those for Income Tax has not been proposed.
We have set out below a brief summary of some of the main personal tax points: –
- As previously announced, the basic personal allowance will be increased in line with inflation to £12,570 in 2021/22. However, it will then remain at this level for all tax years up to and including 2025/26.
- The higher rate income tax threshold (and National Insurance Upper Earnings/Profits Limits) will increase to £50,270 in 2021/22, and again thereafter remain at that level until 5 April 2026.
- The annual CGT exemption will remain unchanged at £12,300 for individuals and personal representatives (£6,150 for trustees) for all years up to and including 2025/26.
- Inheritance tax thresholds will remain at their current levels until 5 April 2026.
- The lifetime allowance for pensions will remain unchanged at £1,073,100 until 5 April 2026.
- The annual limit for individual ISA subscriptions will remain at £20,000 for 2021/22.
Outside of the personal tax sphere, the major tax talking point will be the increase in the top rate of Corporation Tax, from the current rate of 19% to 25% with effect from 2023.
The above list is, of course, far from exhaustive and is based on the information so far available. As ever, further details on most topics will only emerge over the coming weeks as the Finance Bill passes through Parliament, but we hope that this is a useful starting point.
We will continue to provide updates as and when appropriate, but in the meantime please do not hesitate to contact your usual Saffron contact if there is any issue you would like to discuss.