Three-Part Plan to Aid Swift and Sustained Economic Recovery
On 3 March, Chancellor of the Exchequer, Rishi Sunak, unveiled details of a three-part plan to continue giving support through the pandemic, to repair public finances once recovery is underway, and to lay foundations for the future economy.
Mr Sunak opened his statement by revealing the most recent predictions from the Office for Budget Responsibility (OBR) which provide hope of “a swifter and more sustained economic recovery” than previously expected; the UK economy is expected to grow by 4% in 2021 and by 7.3% in 2022.
The Chancellor also confirmed details of various COVID-19 support measures which will see total fiscal support of over £407bn. Mr Sunak chose to freeze personal tax thresholds and increase tax rates on corporate profits in a policy declared “progressive and fair.”
From a taxation perspective, the Chancellor was left with limited headroom as the Conservative manifesto pledged not to alter Income Tax, National Insurance or VAT, so some key tax thresholds were frozen.
For example, the Personal Allowance will rise with inflation as planned in April, to £12,570, before 20% Income Tax becomes payable, and the higher rate threshold, at which people start to pay tax at 40%, will rise to £50,270.
Both thresholds will then be frozen at these levels until April 2026. Similarly, tax thresholds for the pension Lifetime Allowance, Inheritance Tax and the annual exemption for Capital Gains Tax will remain until 2026.
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The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.