Budget 2021 – Good News For Home Buyers And Employers

Yesterday’s highly anticipated budget delivered good news for home buyers and employers.  Instead of the rumoured tax raid on businesses and those with accrued wealth, Chancellor Rishi Sunak set out a £65 billion spending package to support the UK economy as it recovers from the effects of the Coronavirus pandemic.

Furlough scheme extended

Employers and employees will be relieved by the announcement that the Furlough Scheme has been extended to the end of September.  Not only will this protect jobs, but it will also allow employers to retain key talent, ensuring they have the resources in place to take advantage of the predicted summer surge in consumer spending.

Mr Sunak told the Commons: “As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July when we will ask for a small contribution of just 10% and 20% in August and September.”

Stamp Duty holiday extended

This announcement came as little surprise, especially given the predicted chaos should the property market fall off a cliff-edge if the Stamp Duty holiday abruptly ended on 31 March with hundreds of thousands of transactions uncompleted.

For properties in England and Northern Ireland, the current Stamp Duty threshold of £500,000 will continue until the end of June, with the nil rate band set at £250,000 – double its standard level – until the end of September.

First-time home buyers low-deposit mortgage guarantee scheme

Generation Rent is set to benefit from a new government-backed mortgage guarantee scheme.  With low-deposit mortgages virtually wiped out by the Coronavirus pandemic (most lenders now require at least a 10% deposit), it has become even harder for young people to buy their own home.  The Chancellor confirmed that “several of the country’s largest lenders including Lloyds, Natwest, Santander, Barclays, and HSBC will be offering these 95% mortgages from next month.”  Virgin Money and others are to follow shortly after.

The 95% mortgages will be available to all buyers of properties costing up to £600,000, which accounts for 86% of homes currently on the market.

Estate and tax planning now imperative

The budget was not all good news.  Although the Conservative manifesto pledge not to raise income tax, National Insurance, or VAT has been kept, several tax allowances, including the pension ‘lifetime allowances’ and, the personal tax allowance have been frozen for several years.  Due to the inevitable rise in wages and asset values, many people will eventually end up with less disposable income.  Those with a pension pot higher than the now- frozen threshold of £1.07 million may have to pay tax charges of up to 55% on savings above the allowance if taken as a lump sum, or 25% if taken as an income.

Final words

Despite the extension of the Furlough Scheme, redundancies will inevitably occur once it ends.  All parties to an employment relationship must ensure they receive expert advice on matters such as the redundancy process and Settlement Agreements to protect themselves against stressful and expensive Employment Tribunal claims.

For people buying and selling property, it is vital to ensure your transaction progresses as quickly as possible.  Both lenders and local authorities are still experiencing delays in processing mortgage agreements and property searches.  For those wanting to take advantage of the full Stamp Duty tax break, June will swiftly come around.  By instructing an experienced Residential Property Solicitor to manage your transaction, you have the best chance of completing your sale and purchase in time to benefit.

Finally, if you want to protect your wealth and pass it down to the next generation, robust tax planning is now essential.  Aside from the freezing on pension pot thresholds, the Inheritance Tax threshold has been frozen at its current level of £325,000 per person.  With the inevitable rise in house prices over the next few years, more people will find themselves subject to Inheritance Tax.  Discussing your Estate Planning objectives with a Private Client Solicitor will ensure your wealth and interests are protected from a Treasury desperate to plug its now colossal deficit.