02 Mar 2021 Spring Budget Predictions
2021 Spring Budget Predictions
CHANCELLOR Rishi Sunak is promising “a budget unlike any other” on Wednesday with the country entering a “new phase” of the pandemic thanks to the successful vaccine rollout.
Here is how we think he’ll make history, shaping the finances of the UK in the wake of the Covid crisis. as well as some areas to watch as the Budget is unveiled.
Stamp duty holiday
The stamp duty holiday introduced last year served to prop up the housing market at the start of the crisis. The tax break is meant to conclude at the end of March, and many buyers have found themselves facing big bills if they don’t complete their transactions on time. However, it is expected Mr Sunak will extend the stamp duty holiday to prevent this cliff edge.
Adrian Howard, Director at Howard Mortgages comments, “The killer question with the Stamp Duty Holiday is really – is this an extension for everyone already in the transaction process or open again to all? In which case it’s pushing the can down the road, rather than solving the immediate problem”.
Mortgage guarantee & 95% deals
A mortgage guarantee scheme to help people with small deposits get on the property ladder will be in the Spring budget. The government will offer incentives to lenders, bringing back 95% mortgages which have “virtually disappeared” during the pandemic, the Treasury says.
The new mortgage scheme is not restricted to first-time buyers or new-build homes, but there will be a £600,000 limit. The coronavirus pandemic has meant there are now few low-deposit mortgages available, the Treasury said, with just eight on the market in January. They are often seen as riskier by banks as they are more vulnerable to negative changes in property prices – meaning people hold more debt than their home is worth. Under the scheme, which will launch across the UK in April, the government will offer to take on some of this risk.
The scheme is based on the Help to Buy mortgage guarantee scheme, which closed to new loans at the end of 2016, a policy the Treasury said “reinvigorated the market for high loan-to-value lending after the 2008 financial crisis”.
Please note that mortgage providers will only lend to those with a regular income, irrespective of any government incentive.
Job & worker support
The Chancellor said he “is preparing a Budget that provides support for people”. According to reports, Mr Sunak is set to extend the job support scheme – which pays up to 80 percent of wages – until June 30. He is also tipped to extend a £20-per-week uplift to Universal Credit for six months.
Mr Sunak said he will use the Budget to “level” with the public about the challenges facing the economy and the need to repay the vast amounts of public money spent during the pandemic. According to reports, Mr Sunak is likely to announce several tax increases.
There are rumours he will raise corporation tax from its current level of 19 percent to 23 percent, which is still below the G7 average.
There are also rumours he will freeze the personal income tax allowance, which usually rises in line with inflation, pushing many taxpayers into higher bands.
Adrian Howard, comments, “Everything is on the table, but I feel the obvious targets would be CGT aligning with income tax rates, reshuffle of Directors Dividends to align with PAYE rates, £600k+ property tax (wealth tax) and potentially Corporation Tax”.
Road to recovery
Despite this year’s record levels of borrowing, the country does not currently face a fiscal crisis. Low interest rates mean the UK can afford to borrow the money and the Chancellor is likely to recognise that this week. We’re on a long road to recovery as we are still in the grip of the pandemic, albeit hopefully coming out of the other side, as the vaccine rollout gathers pace.
Ahead of the upcoming budget, Quilter’s experts discuss what is likely to be up for consideration by the Chancellor. For Quilter’s guide to the budget, click here >
It is important to take professional advice before making any decision relating to your personal finances. If you have any queries, please contact the team at Howard Mortgages on 01803 554455 or contact us here.
Your home may be repossessed if you do not keep up repayments on your mortgage.