Budget 2021: winners and losers revealed

We round up the winners and losers, explaining how various measures will impact your wallet.

Ahead of today’s Budget, there were many rumours swirling around regarding the contents of chancellor Rishi Sunak’s briefcase.

Some had already been confirmed, such as help for first-time buyers in the form of government-backed 95% mortgages on properties with a value of up to £600,000. Those already on the property ladder are also eligible.

In addition, hours before the Budget, it was announced that there would be an extension of the furlough scheme until the end of September. Employees will continue to receive 80% of their salary until the scheme ends.

In his speech, Sunak confirmed that other rumours ahead of the Budget were right on the money. The chancellor announced an extension to the stamp duty holiday, a future increase in corporation tax (in April 2023) and freezes in income tax thresholds, as well as freezes in the pension lifetime allowance, capital gains tax (CGT) and inheritance tax (IHT). 

Below, we round up the winners and losers, explaining how the various measures will impact your wallet.

Read more of our Budget 2021 coverage:

• Budget 2021 in 90 seconds
• Budget 2021: taxpayers dealt blow as thresholds frozen until 2026
• From ISAs to mortgages: our thoughts on Budget 2021

The winners 

The economy
The chancellor stressed that the government's economic response to the pandemic is working, pointing to the Office for Budget Responsibility (OBR) forecasting a “swifter and more sustained recovery” than what was expected last November.

The OBR is predicting economic growth of 4% in 2021 and 7.3% in 2022. In the following years, growth of 1.7%, 1.6% and 1.7% is forecast.

Big personal tax rises spared
No one expected big personal tax rises to be announced in this Budget, with it being deemed the wrong time for them. Sunak did not raise income tax, national insurance or VAT. Keeping all three at the same level was a key Conservative manifesto pledge in 2019. 

Instead, further financial support for people and businesses that continue to be negatively impacted by lockdown restrictions were prioritised. Raising taxes now, ahead of lockdown restrictions being eased, would also likely have a negative impact on consumer spending when businesses re-open.

Those hoping to move on to or up the property ladder
As mentioned above, property buyers will be able to access government-backed 95% mortgages on properties with a value of up to £600,000. In addition, the stamp duty holiday, introduced last July as a temporary measure, has been extended. It was due to expire at the end of this month, but will now be in place until June for residential property up to a value of £500,000.

From the start of July to the end of September, the stamp duty holiday will apply to residential property with a value up to £250,000. From 1 October onwards, the holiday will end and, as before, stamp duty will apply on properties worth more than £125,000.

Furloughed workers
The government will continue to support workers by extending the furlough scheme (in which 80% of wages are paid) until the end of September. From the start of July, the government will reduce the amount that it puts into the scheme. The government will cover 70% of wages in July, and 60% in August and September, with firms topping up the rest.  

The UK’s IPO market
Ahead of the Budget, the government said that it will consider modernising listing rules. The proposals include allowing dual class share structures and reducing free float requirements. It is hoped the proposals, if given the green light, will encourage more firms to list in London.

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The losers

Large companies
As expected, the chancellor announced that corporation tax will rise. It will increase from 19% to 25% from April 2023.

Sunak pointed out that smaller companies with profits of less than £50,000 a year will continue to pay the current rate of 19%. For those earning more than £50,000 but less than £250,000, there will be relief available for businesses so that they pay less than the main rate of 25%.

But for companies earning more than £250,000 a year, corporation tax will be 25% from April 2023.

Personal tax thresholds
While not a tax rise, the freezing of personal tax thresholds will raise more money for the government when workers receive pay increases. In turn, it will result in a rise in the number of people paying income tax and becoming higher-rate taxpayers.

The personal allowance will, as planned, go up to £12,570 from the start of the new tax year (6 April), but will then stay at that level until April 2026. The higher-rate tax threshold will rise to £50,270 from 6 April, but remain at that figure for five years.

Higher-earning pension savers
It was mooted ahead of the Budget that a freeze in the lifetime allowance for pensions was on the cards, and this was confirmed. This will come as a blow to higher earners, as well as potentially negatively impacting young savers with more modest incomes who are putting money into a pension for the next 30 years.The lifetime allowance is essentially a stealth tax that penalises investment success.

The allowance will be frozen at £1,073,100 until April 2026. For pension savings above this amount, extra tax penalties are incurred, of either 55% or 25%.

The allowance has been progressively whittled away over the years, thereby boosting the Treasury coffers as more people’s pensions have breached the threshold and incurred penalties. A decade ago, the allowance stood at £1.8 million.

But in 2017, when the lifetime allowance stood at £1 million, it was announced that it would from then on be increased each year in line with inflation. This will no longer happen – until at least April 2026.  

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Investors who do not use tax shelters – ISAs and SIPPs
Capital gains tax will remain at £12,300 until April 2026. This further strengthens the case for utilising tax shelters, such as ISAs and SIPPs. Both the annual ISA and Junior ISA allowances will remain unchanged, at £20,000 and £9,000.

CGT is charged on profits from the sale of assets including shares, funds, second homes or buy-to-let properties, business premises, paintings and antiques worth over £6,000, with the rate dependent on the individual’s income and the type of asset sold.

Basic-rate taxpayers pay 10% tax on capital gains, and higher and additional rate taxpayers pay 20%. The only exception is for the sale of second properties, including buy-to-let investments. Capital gains on these investments are taxed at 18% for basic-rate taxpayers, or 28% for higher and additional rate taxpayers.