We might be around six weeks from the next UK Budget (it is due to be delivered on Wednesday March 3rd), but the rumour mill is already spinning on tax hikes being brought in by Chancellor Rishi Sunak.
With the rollout of a vaccine now in full force, the probability of lockdowns being continually brought in far into this year is low. This in turn means the Chancellor can start to look at adjusting the fiscal policy to reduce the deficit, a deficit expanded by the various economic relief efforts - such as furlough and SEISS.
Conservative manifesto pledges rule out some changes that would effect everyone immediately such as income tax, national insurance and VAT - but this means corporation taxes on business profits could very likely be increasing.
In a 'ready-reckoner' published by the Treasury, a one percentage point increase in corporation tax (from 19% to 20%) would net an additional £8.2 billion over the next three tax years. Previous plans (pre-pandemic) were set to reduce the rate to 17% last year - but these had to be postponed. The CT rate would still have some distance to go to match the 28% it was pre-Conservatives.
Some of the other changes that have been costed are detailed below:
- Increase basic rate of tax from 20% to 21% - £15.3 billion raised over 3 years.
- Increase higher rate of tax from 40% to 41% - £3.44 billion raised over 3 years.
- Increase top rate of tax from 45% to 46% - £415 million raised over 3 years.
- Reduce personal allowances by 10% - £24.9 billion raised over 3 years.
- Increase Class 1 NIC main rate by 1% - £13 billion raised over 3 years.
- Increase Class 1 NIC additional rate by 1% - £3.25 billion raised over 3 years.
- Increase Class 4 NIC main rate by 1% - £975 million raised over 3 years.
- Increase Class 4 NIC additional rate by 1% - £630 million raised over 3 years.
- Halve the dividend allowance - £720 million raised over 3 years.
- Lower higher rate kick-in by 10% - £8.75 billion raised over 3 years.
- Decrease Working Tax Credit by £100 - £240 million raised over 3 years.
- Decrease Child Tax Credit by £100 - £550 million raised over 3 years.
- Reduce Tax Credit thresholds by £100 - £90 million raised over 3 years.
- Decrease first child, Child Benefit, by £1 per week - £1.1 billion raised over 3 years.
- Increase Inheritance Tax Rate by 1% - £265 million raised over 3 years.
- Raise petrol duty by 1% - £285 million raised over 3 years.
- Raise diesel duty by 1% - £550 million raised over 3 years.
- Increase VED rates by £5 - £585 million raised over 3 years.
- Raise tobacco duty by 1% - £30 million raised over 3 years.
- Raise duty on spirits by 1% - £90 million raised over 3 years.
- Raise duty on wine by 1% - £135 million raised over 3 years.
- Raise duty on beer by 1% - £95 million raised over 3 years.