2021 UK Budget Breakdown: Strengthening the Public Finances
On the 3rd of March, the Chancellor of the Exchequer, Rishi Sunak announced the government’s 2021 budget. This budget consists of five key components: Economic recovery, protecting jobs and livelihoods, strengthening the public finances, COVID19 relief and devolved nations. Over the coming days, we will be looking at each of these components individually. This post will look at the budget's plan for strengthening the public finances.
Income tax
Income tax is a tax you pay on the money you earn, for example, you pay tax on the money you earn from employment. You are taxed more if you earn more. The percentage of tax you pay is based on what income tax band you fall under:
-> Income tax not to be changed
-> Personal allowance to be frozen at £12,570 from April 2021 to 2026
-> Personal allowance is the income that is untaxed. Any money exceeding £12,570 is taxed.
-> The higher rate threshold to be increased and frozen at £50,270 from April 2021 to 2026
Corporation tax
Corporation tax is a tax that corporations pay on the profits they make.
Companies with profits of less than £50,000 will continue to pay the current 19% corporation tax (This makes up about 70% of actively trading companies)
However, corporations with profits above £250,000 will pay 25% corporation tax beginning in April 2023
Inheritance tax
Inheritance tax is a tax paid by a person who inherits money or property of a person who has died.
The standard inheritance Tax rate is 40%. It is only charged on the part of your estate that’s above the threshold. The threshold is £325,000. This means that if your estate is worth £500,000 then you only pay inheritance tax on £175,000 (The difference between the threshold and the value of your inherited estate)
Alcohol and fuel duties frozen
Duties are a tax on certain types of goods, services or other transactions. Duties are included in the price of that good, service or transaction.
Alcohol duties will be frozen for the second year running, which according to the treasury, will save drinkers £1.7 billion
Fuel duties will remain frozen for the 11th consecutive year