Sunak set to attempt the trickiest of juggling acts
RISHI SUNAK will rise in the House of Commons to deliver his Budget today knowing months of work have gone into attempting to juggle contradictory demands.
The Chancellor wants to continue supporting people and businesses hit by Covid-triggered lockdowns while also outlining a path to get the public finances on to a sounder footing. Here is what we know so far.
Corporation tax
Mr Sunak is expected to announce plans to raise corporation tax from 19 per cent, though the timings and end target remain unclear. There has been speculation the rate could go as high as 25 per cent, still the lowest in the G7.
Sources have pointed to the fact Joe Biden’s treasury secretary has indicated that she wants America’s corporation tax to rise from 21 to 28 per cent.
The increase could start later in the year or early next year if the Chancellor pushes to delay changes with the economy still in freeze.
Income tax
The Chancellor is not expected to raise income tax rates, given the manifesto pledge not to raise the rates of income tax, VAT or national insurance.
However, as The Daily Telegraph disclosed, he is expected to freeze the £12,500 threshold, above which people start to pay the tax, and the £50,000 threshold, above which people pay 40 per cent tax. If it kicks in from April, it would raise up to £6 billion by the 2024 election as millions more pay a higher rate of tax on a chunk of their income.
It is often dubbed a “stealth” tax as the tax rates do not strictly increase but billions more do flow into the Treasury.
Capital gains tax
The focus is on capital gains tax and whether Mr Sunak will increase it as he looks to fill the estimated £40billion fiscal black hole caused by the pandemic.
One idea is that tax thresholds could be raised to something closer to those for income tax. It is not known where Mr Sunak stands but, with fierce warnings from some Tories against such rises, he may choose to delay this move.
Furlough
The Chancellor will extend furlough until September, beyond the mid-june date for when the Government’s roadmap says lockdown will fully end.
The Government will cover 80 per cent of wages for those put on leave due to the pandemic until the end of June, up to a maximum of £2,500 a month.
The support tapers from then. The Government will contribute 70 per cent in July, 60 per cent in August and September, with firms paying the difference to 80 per cent. Extending furlough is a major investment – it costs £5billion a month now – and reflects Mr Sunak’s declared focus on “jobs, jobs, jobs”.
Self-employment grants
Sizeable grants for the self-employed will continue, as The Telegraph disclosed last month, with a fourth round of grants keeping the same terms as earlier versions. The grant for February, March and April will mean the Government covers 80 per cent of monthly profits up to a maximum of £2,500 a month.
Also, those who became selfemployed in the 2019/20 tax year will be allowed grants, closing a loophole that could benefit 600,000 people. A fifth grant is coming but the specifics are unclear. It is likely to be less generous than the fourth. Mr Sunak has also reportedly considered raising NICS for the self-employed closer to the rate paid by firms, but may pass on doing so now.
Pensions
Another closely watched area. Mr Sunak has been reportedly considering freezing the lifetime allowance – the amount people can save before incurring taxes. If he takes that step, also dubbed a stealth tax, people could face a 25 per cent levy on any additional income from their pension pot.
Help to buy and stamp duty
Help to Buy is back, allowing househunters to get on the property ladder with a deposit of just 5 per cent of the sale price. The Treasury will guarantee a chunk of the loan offered by mortgage companies to make it easier for young couples to get approval. The help is for properties worth up to £600,000.
Mr Sunak is also expected to extend the current freeze on stamp duty by around three months so deals on the brink of completion do not collapse.
Fuel and beer duty
Mr Sunak will announce no rise in fuel duty, the 10th year it has been frozen – a reflection in part of vocal campaigning from Tory backbenchers and the Sun. Mr Sunak has also been lobbied by Tory MPS to cut beer duty to help pubs.
Universal Credit
The £20-a-month uplift in Universal Credit, a major benefits payment, will be extended six months, helping poorer families through the financial impacts
High streets
A £5billion fund will be announced to help pubs, restaurants, hairdressers and shops. About 700,000 businesses could be eligible for up to £18,000 each. A major new tax aimed at online retailers blamed for fuelling the decline of the high street is being considered but decisions are unlikely until the autumn.
Cricket and pubs
Mr Sunak will announce a £300million package to save summer sport, with cricket one of the big winners.
Theatres, museums, galleries and music venues will get £400million, while people can apply for up to £1million to rescue local pubs and football clubs. It remains to be seen if a similar scheme to last summer’s Eat Out to Help Out will be announced.
Investment
About £22billion for a new infrastructure bank will be announced, made up of an initial £12 billion on capital investment and £10billion in loan guarantees.
People will also be able to invest in the world’s first sovereign green savings bond. It will be offered by NS&I, which will invest in areas like offshore wind and green-energy crops.