Category: news

If you’re retired or approaching retirement, you may have considered the possibility of selling up and downsizing. Maybe the buoyant property market during the last few months has motivated you to make the move?

Read on for information about the current housing market and what you should consider before you cash in and scale down your home.

The UK property market is enjoying a boom

Figures released by Nationwide revealed that UK house prices rose 13.4% in the 12 months since June 2020; the fastest pace seen since November 2004. Growth has been pushed by the temporary Stamp Duty cut, but we’re yet to see what will happen once this tax break ends.

The UK property market has been rising since the government first introduced the Stamp Duty holiday. While the biggest savings opportunity has passed, you can still save up to £2,500 if you buy a home before the end of September 2021.

Stamp Duty only applies in England and Northern Ireland. If you’re purchasing property in Wales, you’ll have to pay Land Transaction Tax on main amounts over £180,000 on residential properties. In Scotland you’ll be charged Land and Buildings Transaction Tax and, again, rates vary.

How the Stamp Duty reduction works

You only have to pay Stamp Duty on amounts over £250,000 if you purchase residential property between now and 30 September 2021. If you’re a first-time buyer, you don’t pay Stamp Duty up to £300,000.

The table below will help you work out the Stamp Duty you might owe on a first residential purchase (note that the rates for second homes and buy-to-let properties will be higher):

The number of homes being sold rose significantly during the Stamp Duty holiday

Data from HMRC suggests that 198,240 sales completed in June 2021.

The enticement to beat the 30 June Stamp Duty deadline probably gave these figures a boost as, before that date, you only had to pay duty on anything above £500,000.

The chart below shows the number of house sales registered each month since the start of 2020 and illustrates how the Stamp Duty holiday affected the number of sales completed.

Source: Which? From HMRC, 21 July 2021. Figures represent all residential property transactions of £40,000 or above. Figures for April, May and June 2021 are provisional.

The Stamp Duty holiday undoubtedly helped to increase home sales. However, once the tax breaks and government support schemes end, this buoyancy is unlikely to last.

Lack of supply could keep prices high

According to estate agencies, the rise in buyer demand hasn’t been matched with a glut of new properties coming on the market. This imbalance could help keep prices high in the final few months of 2021, but this has yet to be seen.

As well as supply and demand, the general health of the economy and interest rates also influence house prices. While we can all admit the economy has seen better days, the current low interest rates make it cheaper to borrow and this could help sustain house prices.

Make sure you move for the right reasons

If all of this has got you looking around and thinking now’s the time to cash in, sell up and find somewhere smaller to live, make sure you’re moving for the right reasons.

People choose to move home in later life for a variety of reasons. You may want to move somewhere different or closer to family. Or maybe you’ve had a health scare or lost a loved one and this has made you assess your living arrangements.

Whatever the circumstances, a pros and cons list is a great way to help you decide if downsizing is the right move for you.

These pros and cons might be a good place to start.

Advantages of downsizing

Release equity

If you’ve owned your home for years, you’ve probably seen it increase in value. You might have already paid off your mortgage or be very close to doing so. Buying something smaller – and cheaper – will help you release equity and give you extra money to spend or invest to boost your retirement income.

Reduce maintenance

A smaller property usually means less maintenance and may suit your needs better as you get older.

Reduce your bills

Smaller homes are usually cheaper to run. You might see a reduction in Council Tax, and heating your smaller house should be cheaper too.

Move to a more suitable location

If you’re no longer working, or the pandemic has meant you can continue to work remotely, you have the freedom to choose a property in a different location. You may wish to move closer to friends or family, or to find somewhere more convenient and closer to local shops and services.

Disadvantages of downsizing

Your children might want to come home

Your children may have left home, but are they gone for good? High house prices and rent costs mean that more adult children are choosing to live with their parents. If this happened, would you have the space to accommodate them?

You don’t want to leave

Leaving the family home is likely to be emotional, especially if you have lived in the same house for years and raised your children there. Make sure the whole family is ready to say goodbye to the house you love by having open conversations about your plans. Don’t rush into a decision you might later regret.

Leaving friends and neighbours behind

Moving closer to family may mean leaving behind your close network of friends and neighbours, and you might end up with less day-to-day social contact. This could put more responsibility on your friends and family, which could leave you feeling uncomfortable.

Hard to find a home to love

After years of living in a large home, you may find it difficult to find a property that doesn’t leave you feeling claustrophobic with smaller rooms and little outside space.

Lack of options within your budget

Smaller isn’t always cheaper. If there is a lack of smaller properties in the area you hope to move, you may find houses aren’t as cheap as you expected.

Think things through carefully before you decide to downsize

Selling the family home and downsizing to somewhere smaller and cheaper can present significant financial advantages, but it’s not a decision you should take lightly. If you don’t plan and think things through, you could end up unhappy with less money than you had hoped, less space, and less flexibility than you want.

If you want to understand more about the implications of releasing equity from your family home and how much it could boost your retirement income, we can help.

Please email hello@bluewealth.co.uk or call us on 0117 332 0230 to discuss your goals and desires.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Think carefully before securing other debts against your home.

Investing has been around for centuries and the basics haven’t changed as much as you might think. Technology has changed how we invest, but some of the investment lessons from the past are just as relevant today as they were in the 1600s.

Our latest guide looks at the foundations of modern investing, and what you can learn from the past, including:

• How the first stock markets came to be
• Why you should focus on the long term
• Why it’s important to diversify
• Why it’s impossible to consistently predict market movements
• How following the crowd can mean you don’t choose investments that are right for you.

Download “The history of investing and what you can learn from the past” to learn more about how investing began and why some of the lessons still apply today.

Technology has made it easier than ever for scammers to target victims, and the tactics they use are becoming more sophisticated. So, what can you do to protect yourself?

Our latest guide has been released to coincide with Scams Awareness Fortnight and provides the information, tips, and red flags you need to know to protect your assets. You might think you’d never fall for a scam, but it can be more difficult than you think to spot them. According to Action Fraud, more than £11 million has been lost to Covid-19-related scams alone. It’s important to remain vigilant and protect yourself and others.

In our guide you can find out about:

• The cost and impact of scams on victims
• How to spot a scam, including the red flags to keep in mind
• The most common types of scams
• The psychology behind scams and why many go unreported
• What you can do to protect your pension
• The organisations that can help you if you’re worried about scams.

Download “Your guide to scams” to learn more. If you have any questions or concerns about scams, please contact us, we’re here to help you.

Investing for your children or grandchildren is one of the best gifts you can give to the young people in your life. Start saving early enough and you could help them on their way to a £1 million fortune.

Even if your children or grandchildren are already approaching adulthood, there’s still time for them to become a pension millionaire.

A recent report published in FT Adviser has revealed that with steady and consistent investment, thanks to compounding, an 18-year-old could save £1 million by age 68 (the likely State Retirement Age by the time a child today reaches the retirement milestone).

To achieve this goal, they would need to save £1.71 a day into their pension until they reach 68. This equates to 50 years of around:

• £12 a week
• £52 a month
• £624 a year

The calculations are based on an assumed high growth rate of 10%, the long-term average market return over the past 100 years.

Even taking a more conservative 5% growth rate, an 18-year-old can still retire with a comfortable pension pot (£811,697) if they only save £10 a day, or £3,650 a year.

And even if those claiming the world is in a long “low growth phase” are right, the effects of compounding over time still mean you don’t need to save hundreds of pounds a week to achieve millionaire status.

We recently wrote about investing for your grandchildren and, while you won’t quite reach a million in 18 years, you can make significant progress by investing in a pension or Junior ISA (JISA) from when a child is born.

Investing through a JISA from birth

If you saved the maximum allowable amount (currently £9,000 a year) into a JISA for your child or grandchild from when they are born, the JISA could be worth £450,422 by the time they turn 18.

Again, this calculation is based on an assumed growth rate of 10%.

The money will be free of both Income Tax and Capital Gains Tax when they withdraw money from their JISA account, which they can do from age 18. Alternatively they can transfer the JISA to an adult ISA account and continue saving, and benefiting from more and more compound interest.

Paying into a child’s pension

Even if your child is a non-taxpayer, they benefit from tax relief on contributions. If you invested £2,880 (the current maximum contribution eligible for tax relief) into a child’s pension from when they are born, the pension fund could be worth £180,167 by the time they are 18.

Your annual contribution of £2,880 will be topped up automatically by the government, which adds 20% to make the total invested £3,600 each year.

The above calculation is based on the full invested amount of £3,600 every year, growing at an assumed rate of 10%.

This gives them a great head start on reaching pension millionaire status by the time they retire.

“Compound interest is the eighth wonder of the world.”

When asked what mankind’s greatest invention was, Albert Einstein replied: “Compound interest.”

He’s also quoted as saying, “Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.”

Perhaps the most important principles behind wealth creation and long-term investing, for those who are on the right side of it, compound interest is responsible for much of the potential gains behind every long-term investment strategy.

Compound interest is relatively simple to understand

The simplest way to begin is to understand compound interest is that it is interest earning interest.

For example, say you saved £100 in the last year. During that time, you may have earned about £2 in interest. If you keep the money in the bank for another year, you’ll earn interest on £102. So, if you earn the same 2% interest the following year, your savings will be worth £104.04.

While the money isn’t much in this example, extrapolate the concept over a long period, and regular saving has the potential to become a sizeable amount of money.

3 ways you can benefit from compound interest

Once you understand the value of compound interest, you can appreciate the benefits it can bring:

1. Regardless of what you’re saving for, the amount that you save, or your financial knowledge, everyone can earn compound interest on any type of investment.
2. If you are saving money, compound interest is hugely beneficial. However, if you are borrowing, compound interest can wreak havoc on your finances, which is why managing debt is so important in financial planning.
3. Allow your money to compound over the long term, and it will eventually grow at a much faster rate.

Stay on the right side of compound interest and let it work for you

So long as you have compound interest working for you, and not against you as unmanaged debt, Einstein was almost certainly right when he declared it one of the world’s greatest inventions.

By saving for your children or grandchildren when they are young, you will see the benefits of compounding within a few years of consistent saving.

As with compound interest, the effect of each good financial planning decision builds over time. Every cost and tax saving that you make builds more benefit for you and your family in future years.

Investments left to grow will continue to benefit from further compounding for every year that the money remains invested.

If you want to find out more about how you can help the children in your life secure more financial freedom when they reach adulthood, we can help.

Please email us at hello@bluewealth.co.uk or call us on 0117 3320230 to discuss how you can best harness compound growth and save for yours, or your children’s futures.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Levels and bases of, and relief from, taxation are subject to change.

Since Pension Freedoms were introduced in 2015, retirees have had more choice when they access their pension. However, it also means you have more responsibility for generating an income later in life and it’s important to understand what your options are.

Our latest guide explains the basics you need to know, including:

• Why it’s important to have a retirement plan in place
• Your different options, such as buying an annuity or taking a flexible income
• The pros and cons of the different options available to you.

Download “Your retirement choices: how to generate an income later in life” and start planning for your retirement.

It’s never too soon to start thinking about retirement. The decisions you make when accessing your pension for the first time can have an impact on the rest of your life. Setting out a plan now can make sure you stay on track, whether the milestone is just around the corner or decades away.

Talking about homes and property values is something of a pastime in the UK. Property is probably among one of the largest assets we own, so it’s not surprising that we want the value to go up.

While property prices have soared in recent years, investing in your home could push up its value even more. Whether you like to take on projects yourself or hire a professional, our latest guide explains ten things you could do to boost the value of your home, including:

• Creating extra living space by converting the loft
• Updating your bathroom
• Showing your garden some love
• Converting a room into a home office.

Download “10 things that could increase the value of your property” and discover how to boost the value of your home.

Investing for your grandchildren is a wonderful gift for their future. Giving them a healthy financial start to their adulthood might help them fund further education, get a foot on the property ladder, or explore the world without worrying about covering the costs of halfway decent hostels.

Along with a sense of financial independence, making investments for children early in life is a great way to help them learn important lessons about money. As your grandchildren get older, you can involve them in conversations and decisions about where and how their money is invested.

Read on to discover the benefits of investing for your grandchildren and how you can do this.

Invest while your grandchildren are young and reap the rewards of compound interest

Compound interest on investments means the earlier you invest the better.

The biggest advantage when investing for your grandchildren is that the money you put away is likely to be invested for several years. This means you can invest with a long-term approach and enjoy the potential benefits that brings.

Whatever the money will be used for, take full advantage of those first 18 years of compound interest and you’ll be in a powerful position to generate wealth, which could make a real difference to their potential life choices in early adulthood.

What should I consider when investing for a child?

There are a few factors to think about before you choose where to invest your money:

• Timescale – how long before you or they will need to access the funds?
• Risk – how much risk are you prepared to take with the aim of better returns?
• Tax – do you want to ensure a tax-efficient investment plan?
• Charges – what associated costs are involved when setting up, managing, and accessing the investment?

We can help you understand the choices available and explain the tax situation and any ongoing costs associated with investments for grandchildren. We can also help establish access arrangements and mitigate any Inheritance Tax implications.

Invest tax-free using a Junior ISA

While parents or guardians must open a Junior ISA (JISA), the money belongs to the child. Your grandchild can access the money when they turn 18.

A Stocks and Shares JISA is a useful long-term investment vehicle. Any money put into a JISA is free of tax and you can invest up to £9,000 (2021/22) each year.

Saving just £500 a year into a Stocks and Shares JISA can really add up. If you put £500 into a JISA a few months after your grandchild is born, and again before every birthday, by the time your grandchild reaches their 18th birthday the investment could be worth almost £14,350 (assuming 5% investment growth each year, less 1% annual charges).

Investing in a JISA guarantees the money definitely goes to your grandchild, since it’s only the child who may access the money when they turn 18. If they don’t want to take the money out of the ISA at this stage, the account will transfer to an adult ISA, allowing them to keep the funds invested.

There are various JISA products available. With a wide range of investment sectors to choose from, it’s wise to talk to a financial planner to make sure you’re making a sound decision on behalf of your grandchild. Get in touch if you’d like to discuss the options.

Start contributing to a pension

An alternative to a JISA is to save into a pension. This may seem absurd when your grandchild is possibly still in nappies, but it’s an interesting proposition.

A parent or guardian can open a pension for a child. Once set up, any family member can invest.

Free from Income Tax and Capital Gains Tax, you can invest £2,880 tax-efficiently each year. The government automatically tops up contributions by 20%, so an annual payment of £2,880 automatically becomes £3,600.

As an example, if you invested the maximum of £8,640 (£10,800 including the government contribution) over just three years, the pension could be worth £350,943 in 50 years’ time, with 25% available as a tax-free lump sum when they reach pension age, under current legislation. (Example assumes an average growth rate of 2.5%, with no early withdrawals.)

Any growth is free of tax which helps it to increase in value. Like any investment, its value can go down as well as up.

If you want to invest for your grandchildren and you’re not sure what’s the best option, or what type of fund you should use, we can help.

Please email us at hello@bluewealth.co.uk or give us a call on 0117 3320230 to discuss your wishes and how we can help you give a financial gift to your grandchildren.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Levels and bases of, and relief from, taxation are subject to change.

After a year of lockdown measures, our gardens and outdoor spaces have become far more important. In fact, more than half of people say they get a good deal of pleasure from their garden. With spring arriving, now is the perfect time to invest in yours.

Our latest guide aims to help you get the most out of your garden, whether you love entertaining outdoors, want a space to relax, or even grow your own vegetables. Did you know almost four in ten people already grow some of their own food?

Gardening doesn’t just provide you with a beautiful extension to your home, it can help you remain active and improve wellbeing too. Whether you’re a beginner, or a budding Alan Titchmarsh, you should find something in the guide to help get the most out of your garden this summer and beyond.

Download 10 ways to make the most of your garden in 2021 to read more.

We hope you find some useful tips and inspiration for your garden.

Late last year, the government announced that a range of documents and consultations on future tax policies would be released after the Budget.

Dubbed “tax day”, these announcements came later than usual this year to allow for greater scrutiny after the significant number of changes Rishi Sunak announced in his Budget.

Many experts speculated that savers would see changes to pensions, Capital Gains Tax, and Inheritance Tax relief, with reforms designed to help the government increase its tax take to pay for pandemic support.

However, there’s great news for savers as most of the anticipated reforms were ignored. Here’s what “tax day” means for you.

No change to pension tax relief

One of the most hotly anticipated reforms was to pension tax relief. Many had expected the government to cut higher- and additional-rate tax relief on pensions, perhaps to the basic rate of tax or to a fixed level of 25% or 30%.

However, pension tax relief has escaped reform – at least for the time being.

This means that, if you’re a higher- or additional-rate taxpayer, you can continue to claim additional tax relief on your pension contributions through your self-assessment tax return.

The “tax day” documents also seem to ignore the issue of low-paid workers missing out on pension tax relief because of the “net pay” system.

Former pensions minister, Steve Webb, says: “In a blizzard of Treasury documents on tax, it is pretty shocking that they have failed to address a longstanding tax injustice affecting around 1.5 million lower paid workers. The Conservative manifesto promised to tackle this issue, whereby large numbers of workers miss out on tax relief through no fault of their own.”

The various consultations published only touch on pensions in a technical capacity. Rather than reforming tax relief, the Treasury has instead focused on technical updates on “scheme pays” facilities for public service schemes and the tax treatment of defined benefit (DB) superfunds.

A reduction in paperwork if you’re dealing with Inheritance Tax

As part of the government’s aim to build “a trusted, modern tax administration system”, the Treasury has adopted a series of recommendations by the Office of Tax Simplification when it comes to the reporting of Inheritance Tax.

Reporting regulations will be simplified later this year so that, from 1 January 2022, more than 90% of non-taxpaying estates each year will no longer have to complete Inheritance Tax forms for deaths when probate or confirmation is required. You’ll also be able to provide an Inheritance Tax return without a physical signature.

Apart from these admin changes, there were no other reforms to Inheritance Tax. The seven-year gift rule remains, as do the nil-rate band at £325,000 and residence nil-rate band at £175,000. The chancellor recently froze these thresholds until 2026.

Capital Gains Tax rates and exemptions remain

Ahead of “tax day” there was also plenty of speculation that the government would seek to reform Capital Gains Tax (CGT). Many expected the annual exemption to be cut, or for the rates of CGT to be aligned with Income Tax rates.

However, CGT remains untouched, and so the present annual exemption of £12,300 applies. This exemption allows you to make gains of up to £12,300 in a tax year before you pay any CGT – although do remember that the chancellor froze this exemption at the present level until 2026 in his recent Budget.

Despite a 2020 report from the Office for Tax Simplification (OTS) saying that CGT intake could be doubled to £14 billion if it was brought in line with Income Tax, CGT rates also remain unchanged:

• Basic-rate taxpayers – 10% on gains above the exemption (18% on residential property)
• Higher- and additional-rate taxpayers – 20% on gains above the exemption (28% on residential property).

Again, the absence of reform is good news if you’re thinking of disposing of an asset and making a gain as neither the exemption nor the rates of tax have changed.

Other minor reforms announced on “tax day”

Alongside a range of highly technical reforms and consultations concerning VAT and other taxes, other measures announced include:

• The government is publishing a consultation on raising standards in the tax advice market. This will seek views on the definition of tax advice and a requirement to make professional indemnity insurance compulsory for all tax advisers. The aim is to improve tax advice and providing taxpayers with better access to redress where they have received bad advice.
• The government intends to legislate later this year to extend “Making Tax Digital” (MTD) to Income Tax Self-Assessment from April 2023.
• There will be a consultation to consider how Air Passenger Duty (APD) could support regional connectivity, alongside the commitment to reach net-zero emissions by 2050. This consultation will seek views on the government’s initial position that the effective rate of APD on domestic flights should be reduced alongside a potential increase to the number of distance bands in order to align the tax more closely with the government’s environmental objectives.
• An announcement that the government will legislate to tighten tax rules for second property owners meaning they can only register for business rates if their properties are genuine holiday lets.

Get in touch

If you want to know more about what the “tax day” announcements mean for you, or want to chat to a professional about mitigating your tax liability, please get in touch.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation which is subject to change.

A year ago, Rishi Sunak delivered his first Budget just as the pandemic began to take hold. While his £30 billion package sounded significant, it’s a sum that has paled into insignificance over the last 12 months as the chancellor has spent £280 billion shoring up the UK economy.

As the chancellor acknowledged in his speech: “The damage coronavirus has done to our economy has been acute”.

So, who are the winners and losers of the 2021 Budget?

Winners

Retail, leisure, and hospitality businesses

It’s been a tough year for many sectors, and retail, leisure, and hospitality businesses have been particularly hard hit.

The chancellor announced £5 billion in government grants to businesses in these sectors. Non-essential retail businesses will receive grants of up to £6,000 per premises, while hospitality and leisure businesses will receive grants of up to £18,000.

Sunak also confirmed an extension to the temporary 100% business rates relief for hospitality, retail, and leisure until the end of June. He will then discount business rates by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.

The chancellor also extended the temporary VAT reduction in these sectors from 20% to 5% until 30 September. There will then be an interim 12.5% VAT rate until April 2021.

Alcohol duties were frozen for the second year in a row.

Businesses with staff on furlough

In a pre-Budget statement, Sunak summed up his Budget: “We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people.”

Sunak most clearly demonstrated this commitment by announcing the government will extend the furlough scheme until the end of September 2021 – longer than businesses expected.

The government will cover the wages for workers who have been put on leave due to the pandemic (up to a maximum of £2,500 a month) at the following rates:

• 80% until the end of June 2021
• 70% in July 2021
• 60% in August and September 2021

Employers will have to pay the difference to 80% – so 10% of wages in July and 20% in August and September.

This is a major commitment by the Treasury as the scheme costs around £5 billion each month.

Self-employed workers (including the recently self-employed)

The fourth Self-Employed Income Support Scheme (SEISS) grant for February, March, and April 2021 will cover 80% of monthly profits up to a maximum of £2,500 a month.

People who became self-employed in the 2019/20 tax year, and have filed a 2019/20 tax return, will also be eligible for the fourth and fifth grants, helping an additional 600,000 workers.

A fifth grant, covering May, June and July 2021 will also be available.

• For self-employed workers whose turnover has fallen by 30% or more, the grant will continue to pay 80% of monthly profits up to £2,500 a month.
• For self-employed workers whose turnover has fallen by less than 30%, the grant will pay 30% of monthly profits up to £2,500 a month.

Homebuyers

As expected, the chancellor announced a three-month extension to the Stamp Duty holiday. This tax break will now finish at the end of June, at a cost of about £1 billion to the Exchequer.

The Stamp Duty nil-rate band will then be increased from £125,000 to £250,000 until the end of September 2021.

Sunak also relaunched the Help-to-Buy scheme to bring back 95% mortgages, which are mainly used by first-time buyers and have been in short supply due to the pandemic.

Here, the Treasury will offer lenders a guarantee covering 95% of property value, up to £600,000. This will encourage banks and building societies to lend to first-time buyers and current homeowners.

Sunak said: “By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, helping people to achieve their dream and get on the housing ladder.”

Lenders including HSBC, Lloyds, and Halifax will offer these deals from April 2021 onwards.

People claiming Universal Credit

The government have extended the temporary £20 per week uplift in Universal Credit benefits until the end of September 2021. This will be a one-off payment of £500.

The National Living Wage will rise to £8.91 from April 2021.

Businesses looking to invest

After announcing a hike in business tax rates (see below), the chancellor announced what he called the “biggest business tax cut in modern British history”.

A new “Super Deduction” will come into force for two years. This means that, when companies invest, they can reduce their tax bill by 130% of the cost of the investment.

Sunak gave the example of a firm currently spending £10 million on equipment. At present they benefit from a £2.6 million tax reduction but, under the Super Deduction they would get a tax break worth £13 million.

The Office for Budget Responsibility say it will boost business investment by 10%.

Drivers

The chancellor cancelled the planned increase in fuel duty.

People living in the East Midlands, Liverpool, Plymouth, and other freeport locations

Goods that arrive at freeports from abroad aren’t subject to the tax charges that are normally paid to the government. The tariffs are only payable when the goods leave the freeport and are moved somewhere else in the UK.

To help regenerate deprived areas, Sunak announced the creation of eight new freeports: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside.

Losers

Medium-sized and large businesses

The first step to repairing the public finances came in the form of a Corporation Tax rise which will come into force in April 2023.

From April 2023, the Corporation Tax rate will rise to 25%. Despite a significant six-point increase in the rate, the chancellor argued that the UK will still boast lower Corporation Tax rates than the likes of Germany, Japan, the US, and France.

Small businesses – those with profits less than £50,000 – will benefit from a “small profits rate” of 19%. This means 1.4 million businesses will be unaffected and pay the same rate.

There will be a taper for profits above £50,000, so the 25% Corporation Tax rate will only apply to businesses who make profits of £250,000 or more. Sunak says that just 1 in 10 companies will pay the full higher rate.

Income Tax payers

While the chancellor announced no Income Tax, VAT or National Insurance rises, the decision to freeze the Personal Allowance at £12,570 and the higher-rate tax threshold at £50,270 from 2021/22 to 2026 equates to, essentially, stealth taxes.

A freeze drags more people into paying Income Tax and will also push 1.6 million people into the higher tax bracket by 2024, raising around £6 billion for the Exchequer.

Pension savers

In an expected move the chancellor announced he was freezing the Lifetime Allowance – the amount an individual can save into a pension before incurring tax charges. The allowance will remain at £1,073,100 until 2026.

This is another stealth tax, as it means that anyone whose pension savings are above this amount could face a levy of up to 55% on any additional lump sums or income taken from their pension pot.

Wealthier individuals and families

Just as the chancellor froze the pension Lifetime Allowance, he also announced a freeze in the Inheritance Tax (IHT) threshold and the Capital Gains Tax (CGT) annual exemption until April 2026.

The IHT threshold will remain at £325,000 with the “residence nil-rate band” at £175,000.

The annual Capital Gains Tax exemption will remain at £12,300 for five years.

As the value of assets such as house prices and investments rises over the next five years, this freeze will see more people face a CGT or IHT liability, raising additional revenue for the Exchequer.

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If you want to chat about how the 2021 Budget affects you, please get in touch.