Budget 2021 – Frozen
The Chancellor was faced with a difficult challenge in this Budget trying to strike a balance of raising revenue whilst continuing to support the economy through the pandemic. It came as no surprise, therefore, that there were no significant changes introduced but that does not mean they are not on the horizon.
Measures announced in this Budget included the freezing of income tax thresholds after they rise in 2021, as well as the pension lifetime allowance, the Capital Gains Tax (CGT) annual exemption and the Inheritance Tax nil rate band, which will all be frozen until April 2026. These measures will no doubt assist the economic recovery, however, more will have to be done in the longer term.
Recent reports suggest one of the areas that is most likely to undergo reform is capital taxes, with the possibility of CGT rates being aligned with Income Tax rates and restrictions on the CGT uplift on death, both of which could have a significant impact on individuals disposing of assets. Other areas that have been suggested for reform are pension tax relief and the future tax distinction between the self-employed and employed.
It had been anticipated that some of these issues would be addressed in last week’s Budget but whilst they weren’t, it would be true to confirm that they remain very much on HMRC’s radar. With further consultations due to be announced on 23 March, our EQ Taxperts will continue to keep you up to date.
We recommend that you review your tax planning regularly to be ready for current and future changes. We would be delighted to speak with you and provide advice based on your circumstances. Our advice to the Chancellor – “Let it go”!