Spring Budget 2021: reasons to be cheerful

Despite the usual pre-Budget hype and speculation, this year’s Budget was another ‘steady as you go’ Budget, once again centred on emergency measures to protect the UK economy from the effects of the on-going Covid-19 global epidemic.

The generous schedule of tax relief on contributions has not been changed, nor the ability to draw tax-free lump sums from the fund, nor the annual savings allowance and the ability to carry forward unused allowances from previous years. 

The Lifetime Allowance will not be reduced, although it will be frozen at just over £1 million. While disappointing for many, this is of course much better than the cuts we’ve seen in previous years and so could have been so much worse! Pension savings continue to sit outside of your Estate for Inheritance Tax purposes.

Inheritance Tax thresholds, and the Annual Exempt Amount for Capital Gains Tax will also be maintained at their existing levels until April 2026. 

The ISA and JISA annual subscription limits will remain unchanged from their current limits, and there are no changes to the Lifetime ISA for the under 40s. Those rightly disappointed with Cash ISA interest rates might consider Premium Bonds, or the ability to transfer to Stocks & Shares ISAs if prepared to take on board some short-term risk.

Venture Capital Trusts too are unchanged, providing a valuable vehicle for tax-incentivised investment in your future. Never any tax to pay on dividends or gains, and an immediate 30% income tax relief on contributions, with the only condition being that you hold for five years.

Thankfully the feared changes to Capital Gains Tax, and an introduction of a one-off wealth tax, have been avoided. However, the Government has already announced that they intend to publish a range of tax-related consultations and calls for evidence on 23 March - a new ‘Tax Day’!

There have also been scheduled some fairly dramatic to rises corporation tax - from April 2023 corporation tax increases 6 percentage points from 19% to 25%. On the plus side, there will be a taper system to protect the smallest businesses.

We will need to wait and see what that may bring, but in the meantime let’s continue to plan for our futures and grab the incentives.

Financial planning will allow you to make the most of the significant opportunities that remain and avoid the rises in personal and business taxation that are scheduled. Pensions continue to be the unrivalled go-to for retirement and legacy planning.