Budget Highlights - March 2021

The Covid-19 pandemic has clearly put a strain on public finances and therefore, it was essential that the Chancellor recognised that some tightening of the purse strings was necessary without putting undue pressure on businesses and individuals alike.

The budget did throw up some surprises for the future, especially with regard to companies and the increase to corporate tax.

We set out below the key highlights of the March 2021 budget:

Business Tax

In the budget speech the Chancellor mentioned that businesses have received substantial support throughout the pandemic (through the furlough scheme etc) and therefore it was only fair that they shoulder some of the future burden.

The main highlights were as follows:

• The main rate of corporation tax will increase to 25% in April 2023 for businesses with profits over £250,000.
• Companies with profits of less than £50,000 with have a corporate tax rate of 19%.
• Companies with profits of between £50,000 and £250,000 will be charged to corporation tapered tax rate.
• A 130% 'super deduction' will be introduced for capital investments in qualifying new plant and machinery.
• Trading losses can temporarily be carried back for three years.
• An extension of the £1m Annual Investment Allowance limit.

Income Tax

It was a sensible move not to increase income tax for individuals. However, by freezing the personal allowance and the income tax thresholds, the additional tax take will still be substantial.

The main highlights were as follows:

• Personal allowance to be frozen at £12,570 from 2021/22 to 2025/26.
• Basic and higher rate income tax thresholds to be frozen at £37,700 and £50,270, respectively, from 2021/22 to 2025/26.
• Pensions lifetime allowance to be frozen at the current level of £1,073,100 from 2021/22 to 2025/26.

Capital Gains Tax and IHT

After much pre-Budget press speculation about potential increases to CGT and a possible wealth tax, very few capital taxes announcements were included in the 2021 Budget.

The main highlights were as follows:

• The current CGT annual exempt amounts of £12,300 for individuals and £6,150 for most trustees are to remain the same up to and including the 2025/26 tax year.
• The IHT nil-rate band and residence nil-rate band have also been frozen at their current levels of £325,000 and £175,000 respectively, until 5 April 2026.

Property Tax

The Chancellor announced in July 2020 that the SDLT nil rate band would increase from £125,000 to £500,000.

In the March 2021 budget this has been extended by a further three months to 30 June 2021 and then tapered until 30 September 2021.