Budget winners and losers
Yesterday Rishi Sunak delivered a budget to guide us out of the Covid crisis. We all knew that the extraordinary schemes to prop up an economy that had the ‘pause’ button pressed on it would carry a large long term cost. The chancellor had to tread a tightrope of epic goldilocks proportions; keeping necessary stimulus in place long enough so not to extinguish the fragile post Covid economic recovery but not too long so that debt levels would spiral out of control and faith would be lost in public finances. Below are our key budget takeaways and implications for our clients.
Budget winners
- Home movers – escaping the city centre deadline was extended with stamp duty holiday extended until the end of June. Original threshold not to return until end of September.
- First time buyers – 95% guaranteed mortgages for first time buyers available from next month.
- Ethical savers – new sovereign green bond announced.
- Businesses committed to investment – tax relief of 130% on ‘business investment’ – this is a unique and clever idea, if not abused, as a great way to fuel sustainable growth is private sector investment that generates jobs and a return on investment.
Budget losers
- All income tax payers – tax free earnings basically frozen at current level until April 2026.
- Pension savers – pension lifetime allowance capped at just over £1m.
- People inheriting assets – Inheritance tax threshold frozen at current level.
- Investors – Capital Gains Tax allowance again fixed at current level.
- Large corporations – corporation tax to go up to 25% from current level of 19% from 2023. Small businesses with under £50k of profits per annum are protected.
Summary and Wealth Management Implications
In summary we will all end up paying for the huge Covid relief spending but it has been staged and most changes are either taxing entities that are doing well (large corporations with over £50k of profit) or not tax rises in absolute terms but in relative terms once you take inflation into account.
The main wealth management implications are additional requirements for pension planning, particularly for business owners who can reduce the amount of corporation tax that they pay by flooding money into their pensions. Inheritance tax planning is also more prevalent with the threshold being frozen.
Markets in general were unchanged showing that the actual announcement was in line with expectations with no huge surprises.
The piper has turned up and wants his two pence.