News

The pandemic Budget - what this means for you and your family

Published: 3rd March 2021
Area: For the individual

Rishi Sunak, Chancellor of the Exchequer, outlined the contents of his red briefcase in the 2021 Budget today (3 March 2021) - setting out as a nation how we will recover from a crisis which has affected everyone, without exception, in some way.

Sunak said his government was “going long” with the focus clearly on fixing the public’s finances, and an emphasis on continued support for both individuals and businesses. Many tax changes were predicted; few actually materialised.

Hannah Tait, partner in our private client team, provides a snapshot of the changes and how these may affect you.

Income tax

The Conservatives promised not to alter income tax rates or national insurance until the next election and they have not reneged on this by altering the rates.

From April 2021 personal tax thresholds for both basic and higher-rate taxpayers will rise, as previously planned to £12,570 and £50,270 respectively, but will then be frozen until April 2026.

Steve Brandreth, senior client partner at independently owned wealth management company Artorius, commented that “this is welcome but it is surely only a matter of time before this comes under the spotlight once again. It is anticipated that further consultation will be recommended, which could be the catalyst for change.”

Capital gains tax

Capital gain is a profit you make by cashing in assets, such as real property (excluding your main home), investments, art and shares excluding cash and shares held within an ISA or pension pot.

For the 2020 to 2021 tax year, the capital gains tax (CGT) allowance is £12,300 (£6,150 for personal representatives and most trustees), so you can liquidate or give away that much in gains completely CGT-free.

During the Budget today (3 March 2021), the government announced the freezing of the CGT allowance until April 2026, which will see many individuals with second homes and investments breathe a sigh of relief.

There was no mention of plans to abolish the current free-CGT uplift on death and this will therefore remain a really useful tool for private individuals who wish to hang onto assets to wipe out gains on death and pass them on to loved ones at their elevated values.

Inheritance tax

Currently, individuals can pass on their nil rate band of £325,000, inheritance tax-free. In addition, there is also a main residence nil rate band that attaches to your main home (currently £175,000) which, in theory, means that a single person could leave their estate worth £500,000 without paying inheritance tax. For a married couple, the inheritance tax-free pot is £1 million, subject to lifetime gifting.  Above these thresholds, inheritance tax is paid at 40%.

Read our guide on what lifetime gifts are exempt from inheritance tax.

The government announced today (3 March 2021) that these allowances will be frozen until April 2026.  There were no further changes announced to the inheritance tax regime.

Stamp Duty Land Tax

There is some good news for those still wanting to move house, with low mortgage deposits introduced and the Stamp Duty Land Tax (SDLT) holiday, due to end on 31 March 2021, extended to 30 June 2021. So conveyancing teams in the UK are likely to remain busy!

Read our blog on what the SDLT extension could mean for you.

We’re here to help

Many of the anticipated tax changes were not forthcoming in today’s budget and will be a welcome relief for many individuals who were fearing seeing their hard built–up wealth going to the Treasury, rather than their loved ones and families.

However, it goes without saying that regularly reviewing estate plans and important documents, such as wills, remains as important as ever. If you’d like advice around personal tax or estate planning then we can guide you through the process - contact Hannah Tait in our private client team for help and support.

Our private client team is ranked as a Top Tier Firm in the Legal 500 2021 edition.

Our free legal helpline also offers bespoke guidance on a range of subjects, with a team of experts on hand for any queries relating to personal and family matters. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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