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Budget 2021: At a glance

Budget 2021: At a glance

Chancellor Rishi Sunak laid out his “whatever it takes” budget today as he sought to balance supporting workers and businesses through the coronavirus crisis with fixing the public finances and rebuilding the economy.

With a roadmap out of lockdown in place and the vaccine rollout progressing at speed, here we review some of the key announcements for Wesleyan customers.

Business support

In a move that will bring short-term relief to many legal and dental practices, the £50bn furlough scheme which guarantees workers 80% of their salary will be extended by three months until the end of September.

The scheme will be gradually phased out from the summer as lockdown eases, with employers contributing 10% in July and 20% in August and September.

A new Recovery Loan Scheme will give lenders guarantees on loans from £25,000 to £10 million in a move to replace the Bounce Back and Business Interruption loans, which are coming to an end, and stimulate lending to businesses. The finance can be used for any business purpose, including growth and investment, and runs from April until the end of the year.

Self-employed

The Self-Employment Income Support Scheme has also been extended with a fourth grant worth up to 80% of average monthly profits during February, March and April, with a cap of £2,500 a month. Access to the grant was also widened to an extra 600,000 newly self-employed people. A fifth grant will cover May until September this year, with more details to be confirmed.

The scheme has proved a lifeline to workers, including many in the dental sector, but it’s important to remember that grants are subject to income tax and National Insurance contributions.

Wesleyan’s Michael Copeland said: “Individuals will need to be careful to factor this into their own financial plans, and ensure it is reported correctly on their returns to HMRC, pending further government guidance.”

Tax

Corporation Tax will increase from the current 19% to 25% in 2023, but firms with profits under £50,000 will benefit from a new Small Profits Rate, which will remain at 19%. Rates will taper above that level so only businesses with profits of £250,000 or more will be taxed at the full 25% rate.

This should help mitigate the immediate pressures on struggling businesses, including private sector dentists, as other support measures including furlough are phased out.

Michael Copeland added: “Some dental practices will be under pressure from these new tax rises, even with the two-year delay to their introduction.

“Where practices are now facing new cashflow squeezes, it will be essential to consider ways to mitigate the impact, including options such as tax funding to help protect valuable cash for investment in other parts of their business.”

The 20% Income Tax basic rate will increase from £12,500 to £12,570 next year, when the higher rate threshold will also increase from £50,000 to £50,270. Both rates will then be frozen until 2026. The allowance usually rises with inflation, so this freeze risks pushing many more taxpayers into higher bands.

The current Inheritance Tax limit of £325,000, which has remained unchanged since 2011, has been frozen until April 2026.

The annual exempt amount for Capital Gains Tax was also frozen until April 2026.

The 5% reduced rate of VAT will be extended for six months to the end of September, when an interim rate of 12.5% will be introduced for another six months, in a move that will benefit dentists offering private cosmetic treatments. The standard rate will return in April 2022.

The longstanding freeze on Fuel Duty will remain in place, which the Treasury says saves the average driver around £100 a year.

From April, companies investing in qualifying new kit to boost productivity will benefit from an upfront 130% first-year capital allowance super deduction, cutting their tax bill by up to 25p for every £1 invested, and a 50% first-year allowance for investments in qualifying assets.

This will be very welcome for dental practice owners investing in capital equipment to upgrade their surgeries. Ultimately, it will slash their tax bill as they invest – supporting growth across their businesses.

Pensions and savings

The chancellor froze the pensions lifetime allowance, which usually rises with inflation, at £1,073,100 for five years until April 2026.

This risks discouraging savers from putting money towards their retirement and has particular implications for doctors approaching the end of their careers, who may be in danger of breaching their allowance and facing punitive tax charges. 

Doctors will be forced to consider turning down extra shifts to reduce their pension growth, or even retiring early, at a time when the NHS is under extreme pressure.

Wesleyan’s Parminder Gill said: “This is a real kick in the teeth to high-earning clinicians who will have been working around the clock on the frontline of the coronavirus pandemic.

“Freezing the lifetime allowance creates a less-favourable tax-regime for pension savers and these changes need to be carefully considered by anyone saving for retirement.”

Stamp Duty

The Stamp Duty holiday, which increased the tax threshold from £125,000 to £500,000, has been extended by three months until the end of June. From then it will be set at £250,000 until the end of September.

A new mortgage guarantee scheme will enable first-time buyers and existing homeowners to secure a mortgage on homes worth up to £600,000 with just a 5% deposit.

Wesleyan’s Jonathan Halberda said: “This will broaden the options individuals have for financing a home and will be particularly welcomed by the younger generations.

“However, buyers will still need to pass lenders’ affordability checks to access a mortgage. 

“Speaking to a mortgage adviser, or a financial adviser, can help you assess what’s within your reach, and what the best deal could be for your situation.”

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