Budget 2021 live: Sunak to freeze income tax thresholds and raise corporation tax to pay for Covid recovery

Latest updates: chancellor extends furlough, universal credit uplift and stamp duty holidayBudget 2021: key points at a glanceFull report: Sunak flags tax rises in budgetThe UK economy’s coronavirus crisis in five charts
Darlington named as site of planned Treasury northern campusUK contactless payment limit to rise to £100 2.19pm GMT The Office for Budget Responsibility’s verdict is out: the tax rises announced in this budget will lift the tax burden to the highest level since Roy Jenkins was chancellor in the late 1960s. Over half of this increase is as a result of a 6 percentage point increase in the corporation tax rate to 25 per cent. This brings the headline corporation tax rate back into line with the advanced economy average but still well below its long-run historical average in the UK of around 35 per cent.However, the widening of the tax base over the past decade means that this relatively modest increase in the headline rate leaves corporation tax raising 3.2 per cent of GDP in revenue by 2025-26, its highest since 1989-90.Freezes to the income tax personal allowance and higher rate threshold for four years bring 1.3 million people into the tax system and create 1 million higher rate taxpayers by 2025-26. 1.56pm GMT Rishi Sunak is relying on so-called fiscal drag to help bring in revenues over the next few years.Freezing the thresholds on personal tax allowances, inheritance tax and the amount you can put into your pension pot tax-free are less politically painful than a full-blown tax rise.
Two measures Sunak says will start tackling debt –

– Freeze personal tax thresholds after next year until 2026. No rise in income tax, NI or VAT, inheritance tax threshold.

– In 2023, corporation tax up to 25% – “fair and necessary to ask them to contribute.”The tax-free Personal Allowance typically increases each year but the Chancellor has announced that it will remain at £12,570 for 2023, 2024, 2025 and 2026 #Budget2021 #tax #fiscaldrag Right – Chancellor has gone full on fiscal drag machine. Freezing thresholds left, right and centre (e.g inheritance tax and VAT). We agree – set out plans for this’s properly gone big on the Corporation Tax rise – up to 25% in 2023. Surprised he’s gone that far. That’s what planning for a 2024 election does for you (ie reduce tax rise pressure nearer the election/make Tory MPs vote it through now).New OBR GDP forecast suggests the economy will grow by 3.9% in real terms between 2019 and 2024, compared to 3.7% in the November 2020 forecast. Before the crisis this was expected to be 7.1%. #Budget2021 growth forecasts from @OBR_UK show return to low, approx. 0.4% a quarter, trend growth after 2022 rebound: 1.7%, 1.6% and 1.7% in 2023, 2024 and 2025. Sugar rush recovery then back to the crawl – secular stagnation debate to rumble on. Continue reading…

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Author : Andrew Sparrow and Graeme Wearden

Publish date : 2021-03-03 14:22:56

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Tags : The Guardian

Budget 2021 live: Sunak to freeze income tax thresholds and raise corporation tax to pay for Covid recovery  
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