Budget  

Advisers 'encouraged' by Budget 2021

Advisers 'encouraged' by Budget 2021

Advisers have responded to the chancellor's latest Budget with a fair mix of excitement, scepticism and critique. 

George Critchley, chairman at True Bearing Chartered Financial Planners, said it was “overall, an encouraging budget” and specifically welcomed the news on the “great success of the furlough scheme”, citing the chancellor’s statistic that unemployment is expected to peak at almost half of the level originally anticipated.

The chancellor now expects unemployment to peak at 6.5 per cent, meaning 1.8m fewer people will be out of work than previously thought.

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On support for the self-employed, who will receive two additional grants, Critchley said it was “great news” and “better late than never”.

Corporation tax

Alistair Cunningham, financial planning director at Wingate Financial Planning said his ‘highlight’ of the speech was the corporation tax increase to 25 per cent from 2023 for businesses with profits of more than £50,000 a year. 

He added: “This also significantly narrows the benefit of dividends versus salary for many – I suspect that’s actually the intended target of the measure.”

But Critchley said: “Corporation tax at 25 per cent in my opinion is not the way to go

“It is also not in line with previous government thinking. Less corporation tax means businesses can grow more quickly.”

He suggested the change would act as a “future brake on growth.” 

Andy Springford, financial planning partner at Mazars, said: “With corporation tax rates increasing for companies generating profits above £50,000 from 2023 onwards, pension contributions, which reduce a company’s taxable profits, become even more attractive.”

But the government is also introducing a 'super deduction' to offset corporation tax rises for some. 

Companies that invest in machinery and new plant assets over the next two years will be able to reduce their tax bills by 130 per cent of the cost - a move the chancellor described as "the biggest business tax cut in modern British history". 

Cunningham said the measure will be “useful for some firms, but for many comes too late” as the big spend on IT equipment and software has already been done in the current year due to home working.

Critchley meanwhile welcomed other measures intended to protect smaller businesses as the economy reopens, such as the new restart grants, which offer up to £6000 per premise allowed to open early and up to £18,000 for hospitality businesses.

He said: “The restart grants for businesses to restart after lockdown will encourage many small businesses to keep their heads down and make it work.

“It is really important that the government continues to reward entrepreneurship. The reality is that many business owners working to build and grow their organisations are doing so with significant personal sacrifice."

However, he added that freezing personal tax thresholds until 2026 was a “massive hit.” 

Basic rate income tax threshold will increase next to £12,570 and remain at this level until 2026. For higher-rate taxpayers, the level will be frozen at £50,270.