Following today’s announcement by the Chancellor, here are the highlights from the Budget in relation to the areas of law that we cover:
Capital Gains Tax (CGT)
CGT allowance frozen at £12,300 until 2026, but no increase in CGT rates.
Taxation for pensions
There are no changes to the annual allowance of £40,000 or the tapered annual allowance rules for high earners. The lifetime allowance remains at £1,073,100 and will be frozen until 2026.
Inheritance Tax (IHT)
The nil rate band of £325,000 and the IHT residence nil rate band of £175,000 remain unchanged and are frozen until 2026. The total potential IHT allowance for an individual is £500,000 or £1,000,000 for a couple.
Stamp Duty and Mortgage Guarantee
Temporary Stamp duty cut on first £500,000 for residential property purchases will continue until 30 June 2021, reducing to £250,000 until 30 September, before reverting to the normal level of £125,000 on 1 October 2021.
From April 2021, the government will provide a guarantee for lenders on mortgages up to £600,000 for first time buyers who only have a 5% deposit (95% mortgages).
Corporation tax for companies with profits over £250,000 will increase from 19% to 25% from April 2023. Businesses with profits under £50,000 will have a small profits rate at 19%, with a taper for business with profits between £50,000 and £250,000.
Value Added Tax
Headline VAT rate unchanged at 20%. The hospitality and tourism sector will continue to have a lower 5% rate until 30 September, rising to 12.5% until April 2022 before reverting to 20% thereafter.
Investment allowances – super deduction
For two years starting in April 2021 a ‘super-deduction’ will allow companies to reduce taxable profits by 130% of any investment they make in new equipment, cutting tax bills by 25p for every £1 they invest.