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Update on the 2021 UK Budget

Rachel de Souza of RSM joined our own John Williams to discuss the UK Budget announced on 3 March. They highlighted what the announcements meant for private clients who file taxes in the UK.
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Published 4 March
44 mins

With UK national debt at record peacetime levels, there is significant speculation that the UK’s chancellor of the exchequer, Rishi Sunak, will have to raise taxes as he sets out his first budget on 3 March 2021. And the reviews by the Office for Tax Simplification into capital gains tax and inheritance tax have pushed these taxes to the top of the list, not least given the Conservative Party’s manifesto pledge in 2019 (albeit before the pandemic hit) not to raise the rate of income tax, VAT or National Insurance.

Hosted by John Williams, head of wealth planning at Nedbank Private Wealth, he was joined by Rachel de Souza from RSM UK. The firm is a global provider of audit, tax and consulting services and Rachel is a partner within its London private client team. John and Rachel sought to set out the key changes announced the day before and flagged what that means for private clients who file taxes in the UK.

We have also provided a brief summary of what was included in the UK Budget, and what was missing. And the guide referenced in the webinar from RSM UK can be downloaded here.

What was included?

Stamp duty land tax

The emergency rate has been extended (for England and Northern Ireland only) and the £500,000 nil rate band is now continuing until 30 June. The chancellor has also tried to avoid a ‘cliff edge’ by reducing the nil rate band to £250,000 for a further three months to 30 September, before the rate returns to the (normal) £125,000 level on 1 October 2021.

The additional 2% surcharge for non-residents will still come into force on 1 April 2021.

Capital gains tax

  • Annual allowance frozen at the 2020/21 rate of £12,300 until 5 April 2026

Inheritance tax

  • Nil rate band to continue at £325,000 and the residence nil rate band at £175,000 until 5 April 2026

Income tax

  • Income tax-free allowance is to be raised to £12,570 in 2021/22
  • This will then be frozen until 5 April 2026
  • The higher rate threshold is also rising to £50,270 in 2021/22
  • This will then (also) be frozen until 5 April 2026
  • The additional rate threshold remains at £150,000.

Value added tax

  • 5% rate for hospitality firms to be maintained until 30 September 2021
  • Then a 12½% rate kicks in until 31 March 2022

National insurance

  • No increase in national insurance for the self-employed

Pensions

  • Lifetime allowance of £1,073,100 frozen till 5 April 2026

Corporation tax

  • A small, main and blended rate from April 2023
  • Small profits rate on companies with profits of £50,000 or less remains at 19%
  • For companies with profits of £250,000 and over, the main tax rate is rising to 25%. This is the rate that family investment companies will also pay
  • Companies with profits in between these bands will pay a blended rate

What was missing?

Reform of capital gains tax

  • Substantive reform has been postponed given a review is still being carried out by the Office for Tax Simplification

Major changes to inheritance tax

  • Despite not seeing its threshold updated since 2010, reform has yet to be implemented despite the proposals from the All-Party Parliamentary Group and the Office for Tax Simplification

Wealth tax

  • Despite the frequent press reports, no new taxes were announced.

about the presenters

John Williams

John Williams

John heads up the wealth planning proposition for the international business. He works with clients and their families, in tandem with their professional advisers, to ensure they have a clear financial plan in place to achieve their financial objectives. Working in partnership with our teams of private bankers, he integrates the benefits of wealth planning alongside our broader wealth management and wealth structuring capabilities.

 

John has over 25 years of advisory and management experience, working for global organisations providing solutions to a wide variety of UK and international clients. He joined from Credit Suisse UK where he was head of wealth planning for five years. He has also held similar senior roles at Barclays and UBS.

Rachel

Rachel de Souza

Rachel is a partner in the London private client team at RSM. She deals with a wide range of issues which affect private clients with a particular focus on non-domiciled clients and offshore structures. She also specialises in advising trustees and members of International Pension Plans.

 

Rachel joined RSM in November 2016 from The Royal Bank of Canada where she was joint head of the London private client tax team. Prior to that Rachel spent 12 years with PwC. Her interest in advising international private clients began early in her career when she did her first overseas secondment in the mid 1990s and she gained further international experience in 2001/02 when she worked in PwC’s Geneva office.

Rachel can be contacted by email here.

Access more of our insights

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