On Wednesday, 3rd March 2021, Chancellor of the Exchequer, Rishi Sunak, gave his annual budget speech, announcing the upcoming budgetary changes. In the midst of Brexit and the ongoing fight against Covid-19, this became one of the most highly anticipated budget statements in recent years.
The Chancellor commented that the pandemic had ‘fundamentally altered our way of life’ and done ‘acute’ damage to the economy. This, no doubt, refers to the 700,000 jobs lost and the 10% drop in GDP. However, Sunak did share that reports from the Office of Budget Responsibility indicated that recovery was moving more swiftly than anticipated and that plans so far seem to be working.
Protecting jobs and livelihoods
After his opening remarks, the Chancellor dove right into the heart of the matter. With a focus on protecting the jobs and lives of UK citizens, Rishi Sunak made the following announcements:
The Chancellor committed an additional £1.6bn to the continued roll-out of the vaccination programme beginning immediately.
As anticipated, the furlough scheme has been extended, this time until the end of September 2021. Employees will continue to receive 80% of their pre-Covid income with 10% coming from employers until July and 20% in August and September.
Help for the self-employed
Also expected was the additional support grants put in place for the self-employed. There will be a fourth grant available to cover February-April that can be claimed from April 2021. There will also be a fifth grant to cover the May-September period available to be claimed from May 2021. The amount of the grant available to you will depend on the percentage that your turnover has fallen.
Support for low-income households
The extra £20 per week in Universal Credit will continue for an additional six months and those receiving Working Tax Credit will receive a one-off payment of £500.
National living wage
The full national living wage for adults has been raised to £8.91 from April 2021. The minimum age for this full amount will also be lowered from 25 to 23 for the first time.
Continued support to workers with the furlough scheme, grants for the self-employed and the increase in support for low-income households provides further confidence to think about future security and protecting your income and savings.
This means that furloughed employees will have income, as well as pension payments, coming through for a further six months. It’s important to remember that your pension is one of the most efficient ways to save for your future.
Personal taxation and allowance
Some of the changes announced relate to tax thresholds and personal taxation.
The income tax Personal Allowance will rise with CPI as planned to £12,570 from April 2021, but will then remain at this level until April 2026.
Inheritance tax thresholds and the Capital Gains Tax Annual Exempt Amount will remain at their current levels until April 2026.
As previously announced in February 2021, in 2021-22 NICs thresholds will rise with CPI, bringing the NICs Primary Threshold/Lower Profits Limit to £9,568 and the Upper Earnings Limit (UEL)/Upper Profits Limit (UPL) to £50,270, in line with the higher rate income tax threshold.
The UEL/UPL will then remain aligned with the higher rate income tax threshold at £50,270 until April 2026. NICs thresholds apply across the UK.
The Pensions Lifetime Allowance will remain at £1,073,100 until April 2026. This may impact savers as it could mean more people being subject to pension tax charges.
If you are concerned about whether or not these changes impact your tax or financial planning, do speak to a professional adviser.
Pensions and savings
There were also a number of changes directly related to pensions and savings. As Creative Pension Trust members, it is important that you be aware of any changes that may impact you.
The government is introducing a green retail savings product that will empower all UK savers to support green projects. These ‘retail green savings bonds’ were designed to help the transition to net-zero greenhouse gas emissions by 2050.
The ISA, Junior ISA and Child Trust Fund annual subscription limits will remain the same through the next tax year.
There will also be consultations by the FCA into investment rules for pension schemes post-Covid, to ‘give the industry more flexibility to unlock billions of pounds from pension funds into innovative new ventures.’
If you have questions about how these changes could affect you or your pension, don’t hesitate to reach out.
Business investment and taxation
By far, the most extensive portion of the budget announcement focused on changes for businesses both in terms of investment and taxation. Many of these changes offer opportunities for business owners to grow their companies and to further support the economy.
Several of these incentives are available for businesses of various sizes. If you are a business owner, it is important to maximise the benefits that you can receive from these endeavours to help support your company.
In addition to personal and business adjustments, there have been other changes that may affect your investments going forward, particularly if you manage them yourself.
Changes to Stamp Duty and a new mortgage guarantee scheme mean that the government is further investing resources to change ‘Generation Rent’ into ‘Generation Buy.’
Promises of support to UK infrastructure mean additional funding for the Airports and Ground Operations scheme as well as introducing the UK’s first-ever Infrastructure bank dedicated to funding infrastructure projects.
The freezes on excise duties for alcohol, fuel and HGVs will be extended for the time being. However, regular Vehicle Excise Duties (VED) will increase in line with RPI.
£700m of additional funding was committed to supporting students in catching up on ‘lost learning’ as a result of Covid-19.
A wide range of environmental measures has been announced. These are set to include:
- A £20m programme to support floating off-shore wind technology
- A new £68m competition to implement first-of-its-kind energy storage prototypes and technology demonstrators
- A £4m UK-wide competition for the first phase of a biomass feedstocks programme, to support the rural economy in making improvements to the production of green energy crops and forestry products
Banks will now be allowed to support single contactless payments up to £100, and cumulative contactless payments up to £300, without the need for customers to input their chip and pin. The banking industry will implement the new limits later this year.
Government support in these areas could offer interesting investment opportunities, particularly for those managing their own pensions. Investment in environmental programmes and the introduction of the green retail savings product indicate that ESG (environmental, social and governance) investing is still on the rise and is gaining traction.
This is something you may wish to bear in mind when making any investment choices, but be sure to consider taking professional financial advice or guidance when you make any investment decisions.
Although not all of these changes directly impact your pension, they do affect the economic world around you and are important to keep in mind. Especially important will be any changes that influence the types of investments that are effective in the future and announcements that inform tax planning and future savings options.
You can check up on your pension by logging in to the Creative Pension Trust Member Portal. For more information about how to change your investments, download your copy of our Investment Choices guide.