Budget 2021: Sunak hikes corporation tax in “honest” Budget
During his Budget speech to the House of Commons today, Chancellor Rishi Sunak promised to “protect the jobs and livelihoods of the British people” following the pandemic.
However, he also cautioned that fixing the long-term damage “will take time”.
This is Sunak’s second Budget since taking on the role of Chancellor, and he’s got an extremely tough job in stemming the economic devastation caused by the coronavirus crisis, support jobs and, of course, rebuild the public finances.
That said, whilst he is being called a hero for the ongoing, unprecedented levels of support, it should also be noted that, somewhat stealthily, he is dragging more and more people into the tax net.
Indeed, he is hiking taxes under the radar.
Although income tax isn’t going up, the Chancellor is putting a freeze on personal tax thresholds, so as incomes rise and thresholds don’t, he can generate money by fiscal drag.
As such, those who will be impacted the most by this stealth move will be considering their available financial planning options, including international ones, so as to grow and safeguard their wealth.
In addition, after stating he wanted to be “honest” about his plans to start repairing the public finances, the Chancellor confirmed that corporation tax will rise to 25% from 2023, from the present level of 19%.
However, small businesses with profits of £50,000 or less will not be affected by the tax hike, and only businesses with profits of £250,000 and above will be taxed at the full 25% rate.
Sunak said of the move: “These are significant decisions to have taken, decisions no chancellor wants to make.
“I recognise they might not be popular. But they are honest.”
Rather than hiking taxes, Mr Sunak should have persistently focused on growth and stimulus policies for businesses. This would have been a far better help to companies, the economy, jobs and, naturally, the government’s coffers.
Of course, as well as helping jobs and wealth-creating businesses to thrive, lower corporation tax also attracts business to move and invest in the UK.
As such, this increase in corporation tax will likely lead businesses to consider their overseas financial options.
Although the Chancellor has had an incredibly difficult task with this year’s Budget, furtively dragging more people into the tax net and hiking corporation tax could well have negative, unintended consequences for the Treasury’s bottom line.
As Labour leader Sir Keir Starmer put it: “This is a budget that didn’t even attempt to rebuild the foundations of our economy or to secure the country’s long-term prosperity.
“Instead, it did the job the chancellor always intended, a quick-fix, papering over the cracks.”