Budget 2021: Individuals
Rates, bands and thresholds
The headline announcement was that there will be no increase in income tax rates, in line with previous promises made by the government.
However, the personal tax allowance will increase to £12,570 for 2021/22, as previously announced, but will remain frozen until at least April 2026. The basic rate band will also be frozen at £37,700 for this period, meaning the higher rate threshold will be £50,270.
The NI Upper Earnings and Profits threshold will also be frozen at £50,271 for the next five years.
For savers with only modest non-investment income, the starting rate for savings will remain at £5,000 for 2021/22.
The current ISA, Junior ISA and Child Trust Fund subscription limits will all remain the same for 2021/22.
For self-employed taxpayers, the Budget documents confirm that grants received under SEISS received on or after 6 April 2021 will be taxable in the year of receipt instead of solely in 2020/21. A working household in receipt of Working Tax Credits will enjoy an income tax exemption for Covid-19 support payments.
There will be a temporary extension to the loss carry back provisions for years 2020/21 and 2021/22. The extension will permit a carry back for the three previous tax years rather than just the previous tax year. The extension will permit losses to be offset against profits from the same trade, rather than general income. The existing sideways loss relief provisions remain unchanged, and an extended loss claim can be made as well as a s. 64 claim. There will be an overall cap of £2 million on losses that can be relieved under the extension.
There are also freezes to the CGT annual exemption (at £12,300 for individuals and £6,150 for trustees) the IHT nil-rate band and residence nil rate band (at £325,000 and £175,000 respectively), as well as the pensions standard lifetime allowance (£1,073,100).
Turning to gift holdover relief for business assets, there will be an amendment to the anti-avoidance rule that prevents relief applying to a transfer to a company controlled by a non-resident person connected to the person making the gift. This rule will be amended slightly to ensure it applies where the person controlling the company is also the person making the gift.
Social Investment Tax Relief (SITR) has been extended until at least April 2023 - it was originally due to end in 2021.
Benefits-in-Kind and expenses
There will be a limited easing of the rules regarding employer-provided bicycles, removing the requirement that the equipment provided must be used mainly used on journeys relating to work, e.g. commuting until April 2022. To qualify, the equipment must have been provided on or before 20 December 2020.
For optional remuneration arrangements (OpRAs), a disregard for users of long-term arrangements that are currently enjoying a tax advantage due to transitional rules will be introduced to ensure they do not lose this advantage if they start to receive Statutory Parental Bereavement Payment (SPBP). This will work by specifically excluding SPBP from being a variation in a contract, as this would normally end the entitlement to the transitional rules. This will be retrospective and apply to the 2020/21 tax year.
There will be legislation included in Finance Bill 2021 for income tax exemption for employer-funded (or reimbursed) Covid-19 antigen tests for 2020/21 (retrospectively) and 2021/22. There is already an NI exemption for 2020/21 and this will be extended to 2021/22.
The exemption for Covid-19-related home office expenses, e.g. reimbursements for purchases of equipment to allow working from home, is extended for 2021/22.
A technical change to the off-payroll working rules legislation was announced in November 2020 to address an unintended widening of the definition of an intermediary in the off-payroll working rules legislation, where it is a company. The Budget confirmed that an equivalent change will be made to the NI regulations, as well as introducing a targeted anti-avoidance rule to prevent exploitation of the definition of "intermediary". There are also some minor changes relating to information sharing and use of information in the labour supply chain.