The Budget UK 2021 Summary
What Self Employed Professionals Should Know About the 2021 Budget
Chancellor Rishi Sunak has now announced the much-awaited 2021 Budget. Setting out the governments tax and spending plan for the year ahead.
This is without a doubt one of the most anticipated budgets yet due to the Covid-19 pandemic, resulting in higher demand than ever for government measures to help businesses and jobs recover.
This article will cover the main areas of the budget self-employed professionals need to be aware of. Below is a list of all the articles we have released to cover the 2021 Budget. Feel free to get in touch with any specific questions.
How the 2021 Budget will affect High-Net worth individuals
What the 2021 Budget means for Corporates
Areas of the 2021 Budget that are aimed at supporting minorities
How the Budget will affect mutual funds and the stock market
The 2021 Budget and the Property Market
Highlights of the 2021 Budget for self-employed professionals
As expected, the Chancellor's 2021 Budget's core focus is on continued support as the UK moves towards what hopefully will be the end of the Covid-19 Pandemic this year. The Self-Employed were and are one of the worst-hit by the pandemic. As a result, the budget outlines several measures that will be of particular benefit for self-employed professionals, contractors and freelancers.
The self-employed furlough scheme (SEISS) extended to the new freelancers.
The self-employed furlough scheme (SEISS) has been extended to new freelancers and contractors who filed their first tax return for the 2019/20 tax year. Therefore over 600,000 people can now claim a SEISS grant. This is the 4th self-employment grant announced and will be followed by a 5th SEISS 5.
Although many are relieved to hear they will be receiving support, there is a lot of concern around the date to which the grant will be released: "Late April". One of our clients, a self-employed Yoga Teacher, has stated that the "delayed date is a massive blow and shock. It will be a real struggle financially making it to the end of April- hopefully, something changes".
Minimum Income Floor Removed for Self-Employed on Universal Credit
The minimum income floor for Self-Employed individuals on universal credit has been removed. This will be in place until late August.The minimum income floor is a controversial system used to calculate Universal Credit Payments for Self-Employed Professionals.
Many will welcome the continued removal of the minimum income floor, as those who are not entitled to the Governments financial support scheme can instead receive Universal Credit.
Income tax thresholds frozen
The Income Tax Thresholds will be frozen until 2026. Over raising income tax, Sunak has favoured the method of "fiscal drag". This is a deflationary effect; as wages rise, a higher proportion of income is paid in tax.Below is a great explanation of fiscal drag for those wanting to understand the topic further
The UK 2020/21 tax filing period will begin in April. Contact Us to receive our April filing discount. We are chartered UK tax advisers and accountants for self-employed professionals.
What does the 2021 Budget means for the creative industry?
Following on from our article "what self-employed professionals should know about the 2021 budget", we will be delving into what the budget means for the Creative Industry and Creative Freelancers. As an accountant specialising in creatives, how the 2021 Budget will support creative industry professionals back to the full prosperity of pre-covid years was highly anticipated.
This article will cover some of the main areas of the 2021 Budget announcement that creative industry professionals and businesses should know about.
We are also covering several other areas of the budget in the articles below:
How the 2021 Budget will affect High-Net worth individuals
What the 2021 Budget means for Corporates
Areas of the 2021 Budget that are aimed at supporting minorities
How the Budget will affect mutual funds and the stock market
The 2021 Budget and the Property Market
How is the Budget going to help the creative industry?
The creative industry was one of the worst-hit by covid-19, with around £74billion and 2.7 jobs in 2020. Therefore many have been waiting for the 2021 Budget to lay out how it will pave the creative industry back to health.
£300million to be injected into the Cultural Recovery Fund
£300million is to be added to the £1.7billion Cultural Recovery Fund.
The Cultural Recovery Fund will provide financial support for music venues, museums, independent cinemas, galleries, theatres and heritage sites throughout the UK.
The Culture Secretary, Oliver Dowden, said
"It's a relief we can look ahead now, so this funding is not just about survival, but planning and preparing for reopening theatres, galleries and gigs."
Although many are happy with the creative industry cash injection- there is a large call out from the community for the fund to be extended to freelancers.
£90million injected into National Museums
An additional £90million to be invested into national museums to support them until their reopening in mid-late May.
£18.8 million to be injected into community projects
£18.8million to be invested in cultural community projects.
These projects include £5million to transform part of Wakefield High Street into a community library, museum and gallery space.
Scotland, Wales and Northern Ireland will receive an additional £77million to provide cultural groups with similar support.
Film and TV Production Restart Scheme extended.
The Film and TV Production Restart Scheme have been extended until December 2021. With a £500million fund, it has accepted 160 qualifying productions to date, and according to the government, saved 20,000 jobs.
"Elite Point-Based Visa" and Reform of the Global Talent Visa
Research has shown that the Creative Industries' gaps are more likely to be in higher-level occupations' such as architects and graphic designers. Part of the reason being is thought to be due to inadequacies in the current immigration system.
The 2021 Budget announced an elite points-based visa and a reform of the Global Talent Visa. These policies aim to attract and retain "the most highly skilled globally mobile talent". Depending on how these reforms are designed, they may support the creative industries demand for change.
Creative industry listed in Levelling-Up Fund
Creative Industry included in Levelling-Up Fund.Maintaining and expanding the UK's world-leading portfolio of cultural and heritage assets included as a priority.
Details of plans:
- Upgrading and creating new cultural and creative spaces such as sports or athletics facilities, museums, art venues, theatres, libraries, film facilities, prominent landmarks or historical buildings, parks or gardens.
- New, upgraded or protected community hubs, spaces and assets (and associated green spaces)
- Acquiring and refurbishing key cultural and heritage sites, including hotels and historic buildings
The Recovery loan scheme
The Recovery Loan Scheme will be available to creative industry businesses. The new loan scheme is designed to support UK business access to finance as they grow and recover from the disruption of Covid-19.
The Towns Fun extended to a further 45 Areas.
£1billion to be invested in 45 towns to help the country recover from Covid-19. The fund will be dedicated to cultural and infrastructure projects.
For further information on support available to freelancers, the 2021 Budget for Self Employed article
No Government-backed Insurance Scheme announced yet.
A Government-backed insurance scheme is yet to be announced.
Without which many creative companies will not be able to stage events due to the risk of losses from cancellations as a result of Covid-19
Contact Us for expert tax, accounting and business advice for creative industry businesses and professionals.
Prospective Homeowners Guide to the 2021 Budget
The 2021 Budget is out, and we are covering all areas. This article will be covering the need-to-know facts for prospective homeowners and landlords.
Other areas we are covering:
What Self-Employed Professionals Need to Know About the BudgetHow the 2021 Budget will affect High-Net worth individuals
What the 2021 Budget means for Corporates
Areas of the 2021 Budget that are aimed at supporting minorities
How the Budget will affect mutual funds and the stock market
What the 2021 Budget means for the creative industry
WHAT THE 2021 BUDGET MEANS FOR THE PROPERTY MARKET
STAMP DUTY HOLIDAY EXTENDED.
The stamp duty holiday has been extended for housebuyers up until the end of June. The stamp duty holiday has saved homebuyers around £5billion collectively in stamp duty so far. This tax break helped drive a boom in property prices last year, and clients' comments lead us to believe the incentive will lead to continued interest.
One of our clients, a self-employed musician, commented:
"I wanted to buy last year, but I couldn't find the right property. Because I knew stamp duty holiday was coming to an end, I was going to renew my rental agreement- however, now I have more time, I will be getting back to looking for a property."
This will be welcomed by many who are currently on the hunt for a property.
The Stamp Duty crystallises- therefore, home sales must go through before the end of June to be eligible for the tax holiday.
Is it all good?
One of the key concerns with the Stamp Duty Holiday and corresponding stamp duty holiday extension is that although it has boosted the property market and the economy generally, it has also created an artificial bubble that has seen house prices rise 8.5%. This means that first time buyers have to save more to come up with the deposit.
There is also a risk that prices have been artificially inflated and will go down when the holiday ends. This means that those who brought during the stamp duty holiday period may find they have overpaid, potentially negating any savings made from not paying stamp duty.
GOVERNMENT-BACKED 5% DEPOSIT MORTGAGES
Government-backed mortgages with deposits of just 5% have been announced. This is a huge win for many first time buyers who previously have been required to save between 10- 25% of a properties value to acquire a mortgage.
This will help counteract the effect of increasing property prices.
The government is set to guarantee loans, enabling lenders to offer mortgages worth up to 95% of a properties value work up to £600,000. This means that 86% of properties currently listed on Rightmove should be eligible for the mortgages.
Is it all good?
One thing to look out for with these new mortgages is the interest-rates. We don't know yet what terms banks will be offering; however, higher interest rates than typical can be expected. Although the government is offering a shoulder to hold the majority of risk associated with low-deposit mortgages, banks will still be liable for some of it. Therefore banks are likely to offset the risk by making borrowers pay higher interest rates.
UNIVERSAL CREDIT UPLIFT
An extension to the temporary £20 per week increase to Universal Credit standard allowance for a further six months. This applies to all new and existing claimants and will maintain the higher surplus earnings threshold of £2,500 for Universal Credit Claimants for a further year until the end of the 2021-22 tax year (April 2022).
Landlords argue that this does not tackle the fundamental issues that make Universal Credit inadequate for both tenants and landlords in the Private Rental Sector (PRS). One of our landlord's clients has argued it would be better if tenants had a choice to elect whether the housing element of their Universal Credit is paid directly to their landlords.
Another argument is that all claimants should choose how regularly the Universal Credit is paid to help with budgeting.
Contact Us for expert property tax, accounting and business advice for landlords and prospective buyers.
FILE YOUR 2020-21 PERSONAL TAX RETURN WITH US IN EARLY APRIL TO RECEIVE OUR "EARLY UK TAX FILERS" DISCOUNT. WE SPECIALISE IN BOTH UK AND US TAX AND ACCOUNTING MATTERS.
What Does the 2021 Budget Mean for High Net Worth Individual's: The 5 Year Freeze
This article will cover some of the main areas of the 2021 Budget that may affect High-Net-Worth individuals, resident in the UK.
Other areas we are covering:
What Self-Employed Professionals Need to Know About the BudgetProspective Buyers Guide to the 2021 Budget
What the 2021 Budget means for Corporates
Areas of the 2021 Budget that are aimed at supporting minorities
How the Budget will affect mutual funds and the stock market
What the 2021 Budget means for the creative industry
In the Chancellor’s speech, Sunak confirmed that there will be freezes in income tax thresholds, as well as freezes in the pension lifetime allowance, capital gains tax (CGT) and inheritance tax (IHT), utilising the ‘fiscal drag’ method. This is a deflationary effect; as wages rise, a higher proportion of income is paid in tax.
While the majority of HNW individuals have a gross income in excess of £125,000, therefore unaffected by the five-year freeze in the personal allowance, the freeze in tax thresholds will see their income tax liability rise over the period. As HNW individual’s income rise with inflation, a higher proportion of their income will be taxed at the upper and additional rate band, increasing their tax burden on the 31st of January.
A simple way for HNW individuals to reduce their tax is through pension contributions (extending basic rate and upper rate tax thresholds). However, on Wednesday the Chancellor confirmed that the lifetime allowance for pensions would be frozen at £1,073,100 until April 2026 (reversing the original plan to increase the allowance with inflation). Where HNW’s have to pension savings above this, extra tax penalties are incurred, either 55% or 25%.
Although the majority of HNW individuals have their personal allowance reduced to zero, the freeze in the CGT allowance will have an impact on High-Net-Worth investors. As individuals are limited to £20,000 annual Individual Savings Account (ISA) allowance per year, many HNW’s have investments outside of tax shelters. As share and property prices rise in the next five years (with inflation), High-Net-Worth’s will therefore be exposed to a further 20% / 28% tax on their gains, increasing their tax liability in ‘real terms’.
Finally, the Inheritance tax threshold will also stay frozen at £325,000 per person. This has not changed since 2009. Each individual has a tax-free allowance – ‘nil-rate band’ – of £325,000. If they are giving away their private residence to a direct descendant, there is an additional allowance for ‘the residence nil-rate band’ of £175,000. However, for HNW individuals with an estate over £2m, this is tapered by £1 for every £2 over. With yet another 5-year freeze (taking us to 2026), HNW individuals estate’s will be subject to a further 40% tax, as house prices and wealth levels rise. Legal inheritance rax planning is one of the easiest and most beneficial ways to lessen the tax bill caused by the new stealth tax (taxation levied in a covert or indirect manner) which has been introduced.
Contact us for more expert tax, accounting and business advice for high net worth individuals. We are a chartered, personal tax accountants specialist in private wealth and HNW matters
How the 2021 Budget Will Affect Investments and the Stock Market
Chancellor Rishi Sunak’s new 2021 Budget’s main aim is to restart the UK’s economy after lockdown. The new Budget has a lot more detail relating to personal finance and investing than last year’s budget. This article outlines how some of the key measures will affect your investments and the stock market.
Other areas we are covering:
What Self-Employed Professionals Need to Know About the BudgetProspective Buyers Guide to the 2021 Budget
How will the 2021 Buget affect High-Net Worth Individuals?
What the 2021 Budget means for Corporates
Areas of the 2021 Budget that are aimed at supporting minorities
What the 2021 Budget means for the creative industry
Tax Changes For Investments
The chancellor has set out a plan to raise corporation tax to 25% from 1 April 2023, which will only apply to company profits above £250,000. Multiple reports suggest that the rate will be gradually lifted across the course of the parliamentary term, which is therefore somewhat higher than investors might have been expecting.
Companies who have profits below £50,000 will remain at the current 19% rate, with a taper introduced up to £250,000. According to the Chancellor, this means that 70% of companies will remain ‘completely unaffected.’
These tax increases will have clear consequences for investors in domestic UK stocks since corporate earnings are declared after the deduction of tax. Therefore, the rise in taxes will reduce profit expectations from 2023 onwards, reducing companies’ capacity for buybacks, dividends, and debt repayments.
The revision in tax forecasts can also hurt the net present value of assets as a higher discount is placed on the future value of cash flows. The Chancellor’s most interesting announcements, especially for corporate boards, is what he has called the ‘super deduction tax. This will enable finance officers to offset the total cost of capital investments plus an additional 30%, against their tax bills.
This tax which will be in place for the next two years is a huge incentive for companies to spend their way out of the crisis and it seems to be designed to cushion the blow for companies’ future spending plans and cash flow management, brought on by the corporation tax increase.
Furthermore, it is not immediately clear whether investments will extend to intangible or other hard-to-value assets. But overall, this can be a large incentive for growth-focused UK stocks, with the OBR suggesting that these measures can lead to a 10% boost in investments, which is equivalent to more than £20 billion a year.
ISAS and Pensions
As well as holding basic and higher tax thresholds until April 2026, the Capital Gains tax allowance was forecasted to be cut as a part of a wider wealth tax’ on investors, but like the other allowances, it has been frozen at £12,300 until April 2026. ISA allowances have also been frozen at £20,000 for adult ISAs and at £9,000 for junior ISAs.
The Pension Lifetime Allowance (LTA) will also be frozen at £1.07 million, for the same period. There is some criticism on the move being a ‘tax on good investment decisions’ and the head of pensions products at Fidelity International, James Carter, says there needs to be a full review on pensions and tax. According to Carter, there are already significant savings gap and uncertainty in the pension’s taxation regime can damage people’s engagement in planning for retirement.
According to the chief executive of Wealth Club, Alex Davies, the LTA freeze is a huge blow to more wealthy pension savers which means that people will need to look beyond pensions in order to build large retirement pots. He also states that this is likely to motivate more sophisticated investors towards Venture Capital Trusts and Enterprise Investment Schemes, which have not been affected by the latest Budget changes.
UK Stock and Green Bonds
The Budget also demonstrates how the UK government is hoping to cash in on the demand for sustainable savings with the launch of a green savings bond through NS&I. The green bonds offer a winning combination of helping investors support green projects and at the same time protecting them with the strength of the NS&I name.
The green bonds come with 100% government backing, which should help the UK hit the target of being net-zero for carbon emissions by 2050 and creating green jobs. Although at the current moment it is unknown what the green bonds will run for or what rate they will pay, there is hope that the NS&I will take this opportunity to offer something very lucrative to investors. The government expects to issue £15 billion in green bonds this financial year, further details to follow in June.
The Chancellor also mentioned a review on UK share listings that will have an impact on retail investors. This is known as the ‘Hill Review’ and the changes within it are designed “to make the UK the best place for high-growth, innovative businesses to publicly list”. It could make changes to how many shares in a company are available to the public and lead to smaller companies to list. The chief executive of Stanhope capital, Daniel Pinto, says that the current listing rules are stuck in the past and leave London on the back foot against other financial centres. He said the “City should no longer be synonymous with big banks and FTSE 100 companies. It should become the financial centre of choice for SMEs and fast-growing businesses”.
Contact Us For expert tax, accounting and business advice for Investors
How the 2021 Budget Will Help Equality and Diversity
The economy has taken a huge hit as a result of the Coronavirus pandemic, with very few jobs being offered to those job hunting and others losing the jobs that they had. Nevertheless, the new 2021 budget that has recently been introduced by the government plans to pave people’s ways back into the working world.
There’s still the question of how it might help minorities, such as people from BAME backgrounds, or anyone a part of the LGBTQA+ community, and women in general. They actually stated that they make recommendations for investments and policies to promote gender equality for women in all their diversity in the recovery from Covid-19.
This article will cover some of the different government legislations that could benefit equality and diversity. We have also covered the following 2021 Budget topics:
What Self-Employed Professionals Need to Know About the BudgetProspective Buyers Guide to the 2021 Budget
How will the 2021 Buget affect High-Net Worth Individuals?
What the 2021 Budget means for Corporates
How the 2021 Budget Will Affect Investments and the Stock Market
What the 2021 Budget means for the creative industry
Although there is no substantial legislation for those with disabilities, BAME or LGBTQA+ communities, there are several budget changes that could improve equality and diversity. Most prominently, there are many ways that businesses may be able to employ Budget to work towards improved equality and diversity standards. For example, 35 of the UK's major environmental organisations collaborate on an employment scheme to diversify the sector further. The increased funding for apprenticeships announced could be used to support these efforts further.
Stamp duty holiday extended and 5% mortgages
Evidence has shown that Black families struggle more to get on the property market, this is due to a number of issues that extend far beyond getting a deposit together. However, the Stamp Duty Holiday and 5% mortgages could indeed assist those who already have savings or who are on income that will allow them to afford a 5% deposit before the end of June.
The extent to which this will really help can be disputed, the stamp duty holiday has sent property prices through the roof meaning that an above-average income and larger deposit is still required.
For more on the 2021 budget and what it means for those buying a property in our "Prospective Homeowners Guide to the 2021 Budget"
Helping BAME businesses recover from Covid-19
Evidence shows BAME businesses have been incredibly hard by the coronavirus pandemic. This is thought to be due to the higher sickness and mortality rates Covid-19 has had on the BAME communities. There is a demand for increased grants to help such businesses get back on their feet and grow.
Again, although there is no legislation specific to BAME businesses there have been a number of grants and exemptions made available to businesses in the 2021 Budget.
Some of the opportunities include the Kickstart Scheme, which allows corporates to hire people that they would only have the pay minimum wage, but is a beneficial factor for both them and the employee, as they’re able to give those struggling to find a job because of the pandemic, a chance to put get the foot into the career path they’re looking to get into. BAME business will also be giving those from a BAME background more equal opportunities.
Chancellor Rishi Sunak also confirmed the Government’s decision to boost incentive payments for businesses to hire apprentices of any age. He also said the Government would invest £126 million “to triple the number of traineeships.” Meaning that BAME businesses will be able to hire more people.
Equal opportunities for employment in 16-24
There has also been a kick-starter scheme that has been introduced that aims to help those ages 16-24 to avoid long-term unemployment. It works by offering a person between the ages of 16-24 to work as an employee and be paid minimum wage, allowing them to work during the pandemic. This scheme is probably the one that has been a great advantage for people between that age gap across the UK as unemployment has been a huge problem for the country, especially for those trying to find their way into the working world.
It creates an equal opportunity for those between 16-24 because when you're competing with new graduates, people with a few years' experience who lost their jobs during the pandemic and even people with 10+ years' experience, it can be extremely overwhelming and difficult to find a job. The scheme introduces a new way of giving people a chance to learn without needing a certain amount of experience but gives them a chance to land a permanent position at the end of the scheme. Many companies have hopped on board to open positions for those who are actively looking to be employed to avoid long-term unemployment.
Although it’s an amazing opportunity for those between 16-24, training providers are concerned that the new scheme will replace apprenticeships for young people – stating that those who take part in the Kickstart Scheme will not be able to be apprentices, claiming that “those furthest from the jobs market, are at risk of never entering it”.
Equality for women and the 2021 budget
In a speech by the Minister for Women and Equalities, Liz Truss, set out the Government's latest approach to tackling the inequality between men and women across the UK, held on the 17th of December. The speech, which was called the 'New Fight for Fairness,' explained the current problem with the debates around equality in the UK. She went on to explain why "now is the time to root the equality debate in the real concerns people face." For women, one of the briefings includes a budget for women and employment. Research shows that women are the majority of employees’ industries with some of the highest Covid-19 job losses, including retail, accommodation and food services. Therefore, women have outweighed men by being furloughed all across the UK; it's taken a huge impact on young females, especially, who are new graduates or even just finished secondary school.
Rishi Sunak has extended the self-employment income support scheme (SEISS) to the end of September, benefiting self-employed females. As well the extension of the self-employment income, he announced the furlough scheme would also be extended until September.
Support for those with Disabilities
The Departments for Work and Pensions (DWP) confirmed that the State Pension will rise by 2.5% this year, and benefits by 0.5% starting from April. This includes Disability Living Allowance (DLA) – the highest being £89.60 (from £89.15) and the lowest being £23.70 (from £23.60).As for work grants, people with disabilities are able to get a grant. A work grant helps to motivate and help a disabled person to stay at work, or to start working. They also have the option of talking to their employers about changes they must make in the workplace that could make it easier for them if they have a physical disability for example. They can then apply for a work grant via gov.uk
To apply for one, the person applying needs to be a resident in the UK, have a disability or long-term health condition, or mental health condition and are aged 16 and over.