£3bn Budget tax grab will hit start-up businesses
CHANCELLOR Rishi Sunak is planning to mount a £3billion tax raid in this month’s Budget by targeting entrepreneurs, The Mail on Sunday has learned.
The plan to abolish entrepreneurs’ relief is part of a ‘tax and spend’ statement which is likely to cause unease among the more fiscally hawkish Tory backbenchers. They have already signalled that they will rebel against any measures in the Budget which single out higher earners.
Lobbying by the backbenchers has already forced the Treasury to ditch plans to cut pension tax relief from 40 to 20 per cent for high earners, while the possibility of a mansion tax on expensive homes was strangled at birth in Downing Street amid fury from MPs.
A number of Tories have also indicated they will rebel if the Budget is used to raise fuel duty.
But the Treasury is determined to press ahead in the March 11 Budget with plans to abolish entrepreneurs’ relief, which taxes people who sell their businesses at a reduced rate of 10 per cent up to a threshold of £10 million.
The Resolution Foundation called it ‘the UK’s worst tax break’, and argued that scrapping the ‘expensive, regressive and ineffective’ tax would generate £2.7billion that could be spent on the public sector.
Mr Sunak’s team have also been canvassing business reaction to introducing a range of new green taxes as part of a drive to tackle climate change.
The Chancellor needs to tap into new revenue streams to fund Boris Johnson’s ambitious programme of big-ticket spending plans, including an investment splurge on the NHS, HS2, and a bridge between Scotland and Northern Ireland.
But despite the Prime Minister’s 80-seat majority, No10 has been alarmed by the level of disquiet on the Tory backbenches: in the coming days alone, they are expecting pushback in the Commons from Tory MPs opposed to HS2 and the decision to allow the Chinese giant Huawei to help build the UK’s 5G telecoms network.
The former Chancellor Sajid Javid – who was replaced by Mr Sunak after resisting a move by No10 to sack his aides – claimed in an interview yesterday that he had wanted to cut taxes in the Budget, including 2p from the basic rate of income tax.
The 2p reduction, which No10 denies was under serious consideration, would have cost the Treasury £10billion a year. Mr Javid also said Mr Johnson’s plans would cost £100billion in extra day-to-day spending over the next five years, in addition to a further £100 billion in capital spending.
It came as a survey of small businesses found that while more than a half wanted Mr Sunak to announce a review of business rates, which have been blamed for the number of firms in financial difficulty, there was less enthusiasm for Mr Johnson’s flagship infrastructure spending.
The survey by iwoca, the small business lender, found that just 21 per cent thought the projects should be a priority. The Treasury declined to comment.