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Budget 2021 – what it means for you

Coutts experts consider what impact the 2021 UK Budget could have on your finances.

3 min read


Investments | 04 March 2021



Coutts experts consider what impact the 2021 UK Budget could have on your finances.

3 min read



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The chancellor Rishi Sunak’s budget announcements on Wednesday were focused on shoring up business and individuals battered by the waves of coronavirus and subsequent lockdowns.

We asked some of our experts to consider the contents of the budget and what they might mean for our clients and the broader economy.


Your Financial plan –

make the most of your existing allowances


Image of Hannah Buxton

RIAZ MANSHA, senior financial planner

Image of Hannah Buxton

RIAZ MANSHA, senior financial planner



From a financial planning point of view, this budget leaves things mostly unchanged. Rumoured announcements on changes to Capital Gains Tax (CGT) or the introduction of a Wealth Tax – covered in more detail in our budget preview on Monday – weren’t mentioned. A number of consultations are due to be released on 23 March, and so there may be more news then.

One thing to note is that the Income Tax bands announced by the chancellor only apply to England and Northern Ireland. Scotland and Wales set their own Income Tax bands and so clients living there should wait for announcements from their national assemblies. The Personal Allowance will increase to £12,570 from April 2021, as expected, but it will remain frozen until April 2026.


ISA, Pension & Inheritance Tax Allowances unchanged but frozen

Generally, allowances remained unchanged but have been frozen at their current levels until 2026. You should continue to make the most of any allowances you have but bear in mind that they will become relatively less generous in the coming years as inflation takes its toll.

Making the most of these allowances remains a key financial planning step. A stocks and shares ISA is a simple relief that all clients should consider. If you make full use of your allowance every year it will build up into a substantial sum over time, free of UK capital gains and income tax.


It’s quick and easy to set up a stocks and shares ISA using Coutts Invest


Pensions lifetime allowance

One allowance freeze worth highlighting is the pensions lifetime allowance. If the total value of your combined pensions is at or near the current £1,073,100 limit, it could be worth reviewing your contribution plans for the rest of the year.

Pensions otherwise remain untouched, so if you’re still within the limit you should make the most of your pension contribution allowance. It remains one of the most generous tax reliefs available and shouldn’t be ignored.

Coutts Invest provides a simple way to top up your pension every year, or combine all your pensions in one convenient place.

Find out more about setting up a pension with Coutts Invest


Stamp Duty holiday extended

Anyone with a property deal in the works will have been pleased by the announcement to extend the Stamp Duty holiday on the first £500,000 of a property’s purchase price until 30 June.

On top of this widely expected measure, there’ll be an extended holiday on the first £250,000 of a property’s purchase price until 1 October, when the nil rate band will return to its usual level of £125,000.


The economic impact –

A tale of two crises


Image of Hannah Buxton

LILIAN CHOVIn, head of asset allocation

Image of Hannah Buxton

LILIAN CHOVIn, head of asset allocation



To paraphrase Charles Dickens, it was the worst of times and the even more worst of times.

It’s sometimes hard to recall that this is the second big economic shock in a generation. The first was the global financial crisis, which saw big-name financial institutions crumble and economies brought to the brink of disaster.

After that crisis, the priority for governments was to fix budget deficits. Most countries saw some application of ‘austerity’ policies and new policy ideas, like governments buying bonds to increase the money supply – otherwise known as quantitative easing (QE), now a mainstay of monetary policy.

This time around the government seems to have learned the lessons of 2010. In the aftermath of the COVID-induced financial crisis, both monetary and fiscal policy have been – and are likely to remain – extremely accommodative. Increased spending on infrastructure will provide a boost for the economy, while also directing a substantial proportion of new spending on the necessary adjustments for carbon reduction and the green economy.

The hard questions that were worrying economists before the crisis remain, however. How can authorities normalise monetary policy in the long term without causing an economic crisis? These questions will have to wait until the business of commerce is back to more normal circumstances.


The investment view –

budgets no longer move markets


Image of Hannah Buxton


Image of Hannah Buxton




With the measures well-telegraphed and – on a global view – rather parochial, it’s not surprising that investors tend to greet budgets with a yawn these days. Compared to 20 or 30 years ago, the UK economy – along with most of the developed world – is now so connected to global trade and economic policies that the direction of investment markets is primarily determined by trends in the much larger US markets.

We expect this relatively pro-business and ‘slow to increase taxation’ budget to maintain the global confidence in the UK markets evidenced by the strength of sterling since the start of the year.

We could see some tearing of hair in the business press about the rise in Corporation Tax. My own view – which I outlined in detail last year – is that there are other factors that make the UK attractive to global businesses, and that Corporation Tax remains low by international standards.

The focus on short-term government spending to offset the pandemic-driven recession will continue to put upward pressure on bond yields. Despite this, we expect interest rates to remain at very low levels for multiple years as central banks look through the recent commodity-driven rise in inflation and at the fragility of the underlying economy.

The extension of the Stamp Duty holiday will be positive for house builders and could provide a micro-boost for the economy as it leaves home-buyers with a little extra to spend on new curtains and carpets. The government guarantee for 5% mortgages is also likely to support property prices.


This article does not constitute financial advice. The value of investments, and the income you get from them, can go down as well as up and you may not back the amount you invested. Tax reliefs referred to are those applying to UK residents under current legislation, which may change. The availability and value of any tax reliefs will depend on your individual circumstances.


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