Our response to the March 2021 Chancellor’s Budget announcement
The focus remains on providing unprecedented levels of support for jobs and businesses
Tom Stevenson, Investment Director at Fidelity International commented: “The Chancellor’s second budget makes a nod towards repairing the public finances in due course but the focus remains on providing unprecedented levels of support for jobs and businesses. The government recognises that debts must remain high for the foreseeable future and that the best way to mend a country’s broken balance sheet is via growth not cuts.
“The hike in corporation tax to 25%, albeit delayed for two years, is as big as the most pessimistic forecasts. It still leaves the UK just about competitive with our G7 peers, and merely takes us back to the corporation tax rates of a decade ago, but represents a sizeable hit to shareholders. The unexpected offset to higher taxes on profits, however, is an innovative ‘super deduction’, encouraging an investment led boom over the next two years.”
“The promise of eight new tax-advantaged freeports is not as new an idea as the Chancellor presented it, recalling the enterprise zones of the 1980s. But the location of much of the proposed investment is recognition of the new political geography of the UK.”
James Carter, Head of Pension Products at Fidelity International commented: “Freezing the lifetime allowance of £1,073,100 until April 2026 is a relatively easy policy to implement, especially in the face of a £2 trillion debt1 that has accrued as a result of the coronavirus pandemic. Some may argue that this change will only affect those who already have sizeable pension savings, however further tinkering with pensions taxation erodes trust and engagement in pensions.
“We know there is already a significant savings gap, and a lack of certainty and stability in the pensions taxation regime can damage people’s engagement in retirement planning. We know that almost two fifths of workers furloughed due to the pandemic have made changes to their retirement plans2 as a result of Covid-19, and that a further two fifths of all non-retirees believe they won’t have enough money for the retirement they want to see in the future.”
“The proposed changes further illustrate the need to conclude years of debate and conjecture on the future of pensions taxation. A full and thorough review of pensions taxation has to be undertaken and the ongoing uncertainty about how and when it might change removed.”
2 Source: Research was conducted by Opinium Research commissioned by Fidelity International. The survey is based on a sample of 3,000 UK adults during October 2020.
Important information: This article does not constitute financial advice, tax advice or legal advice or provide any recommendations. The value of investments and the income from them can go down as well as up, so you may not get back as much as you invest. Whether you are eligible to invest in a pension depends on your personal circumstances. All tax rules may change, and the value of tax savings depends on personal circumstances. You cannot normally withdraw money from your pension until you are age 55. Parents or guardians can open the Junior ISA and manage the account, but the money belongs to the child and the investment is locked away until the child reaches 18 years old.