Budget 2021: Corporate tax hike and thresholds freeze as Rishi Sunak tries to collect COVID debt | Political news

Chancellor Rishi Sunak has earmarked an additional £65billion of COVID support for employees and businesses – but announced a freeze on income tax thresholds and a rise in corporation tax to help repay UK’s growing debts.

In his budget speech, Mr Sunak outlined a three-part plan to ‘protect the jobs and livelihoods of the British people’.

But he warned ‘corrective action’ would be needed to tackle the UK’s rising debt load, as he explained how the government has now pledged to spend £407billion on support during the COVID crisis, with borrowing at levels last seen in the 1940s.

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Among her main measures, the Chancellor announced:

• An extension of the leave scheme until the end of September and more support for the self-employed

• The £20-a-week increase in Universal Credit will continue for another six months

• The corporate tax rate will rise to 25% in 2023, but with protections for small businesses

• A freeze on the personal income tax allowance from next year until 2026, with a freeze on the upper rate threshold over the same period

• A new “super deduction” regime to enable companies to reduce their tax bill by 130% of the cost of new investments

• According to the Office for Budget Responsibility (OBR ).

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The Chancellor said the COVID crisis had caused “serious” damage to Britain’s economy and acknowledged it would take “this country – and the whole world – a long time to recover from this extraordinary economic situation”.

But he swore to himself: “We will recover”.

“I said I would do whatever it takes; I have done and I will do,” the Chancellor said, reiterating his pledge to support workers and businesses during the pandemic.

The Chancellor said the government had borrowed a record £355billion this year, which he said was ‘the highest level of borrowing since World War Two’, and is expected to reach £234billion sterling next year.

Underlying debt is expected to fall from 88.8% of gross domestic product this year to a peak of 97.1% in 2023-24, before starting to decline slightly.

After telling MPs he wanted to be ‘honest’ about his plans to start fixing public finances, Mr Sunak revealed that part of his action would include raising the rate of corporation tax, paid on corporate profits, to 25% in 2023.

However, small businesses making profits of £50,000 or less will not be affected, while only businesses making profits of £250,000 or more will be taxed at the full rate of 25%.

The Chancellor also announced that the personal income tax allowance – the level above which people pay income tax – will be frozen at £12,570 from next year until 2026.

And the higher rate income tax threshold will be frozen at £50,270 over the same period.

Some have described the measures as a “stealth” increase in people’s tax bills, as they will cause more people to pay extra.

The OBR estimated that the tax hikes announced in the budget raise the tax burden from 34% to 35% of GDP in 2025-26, its highest level since Labour’s Roy Jenkins was chancellor at the end of the years. 1960.

“These are important decisions to make, decisions that no Chancellor wants to make,” Mr Sunak told the House of Commons.

“I recognize that they may not be popular. But they are honest.”

The chancellor warned that the alternatives would be to leave the government deficit as a “problem for someone else to deal with in the future”, or to cut spending on public services.

In an eye-catching move to encourage immediate business investment, Sunak unveiled a two-year “super deduction” program to allow businesses to cut their tax bill by 130% of the cost of new investments.

“Under the existing rules, a construction company buying £10 million worth of new equipment could reduce its taxable income, in the year it invests, by £2.6 million,” the Chancellor said.

“With the ‘super deduction’ they can now reduce it by £13m. We’ve never tried that before in our country.”

As part of the planned extension of the furlough scheme until the end of September, Mr Sunak confirmed that companies will be asked to pay 10% of their employees’ wages for hours not worked in August and 20% in September.

The Chancellor also outlined details of increased support for the self-employed with additional grants based on average earnings, which will now include money for those who did not receive initial government support.

In a business support package, Mr Sunak also confirmed:

• Maintenance of business tariff holidays until the end of June, with a two-thirds discount over the last nine months of this financial year for closed businesses

• An extension of the reduced VAT rate for the hotel and tourism sectors until the end of September, followed by an interim rate of 12.5% ​​for the following six months

• £5bn in new grants for businesses forced to close due to COVID restrictions

• A £700m package of support for arts, cultural and sporting institutions

• A “Help for growth” program giving companies access to training at reduced prices and to new productivity-enhancing software.

Homebuyers will also benefit from an extension of the stamp duty holiday on purchases below £500,000 until the end of June, while Mr Sunak also confirmed a government guarantee on mortgages up to £600,000 £ with a 5% deposit.

The Chancellor also revealed the location of eight new free ports in England – at East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside – with the first-ever UK Infrastructure Bank to be created in Leeds.

And he revealed that a new government economic campus – comprising teams from the Treasury and departments of business, trade and local government – ​​would be established in Darlington, a 25-minute drive from the Chancellor’s constituency of Richmond in the North Yorkshire.

Looking ahead to the UK’s recovery from the coronavirus crisis, Mr Sunak told MPs: “A momentous moment is upon us. A moment of challenge and change.

“Difficulties, yes, but also possibilities. It’s a budget that responds to this moment.”

Labor leader Sir Keir Starmer claimed the budget “falls far short of the transformative change we need to power our recovery for decades to come”.

He said there was ‘no credible plan to ease the debt burden on so many businesses’ and accused Mr Sunak of ‘itching to go back to his free market principles and withdraw his support as quickly as possible”.

“It is a budget that has not even attempted to rebuild the foundations of our economy or secure the country’s long-term prosperity,” Sir Keir added.

“Instead, he did the job the Chancellor always intended, a quick fix, covering up the cracks.”