RISHI Sunak is reportedly plotting a stealth rise in income tax to plug the £43billion black hole caused by Covid.
The Chancellor is understood to be planning to freeze the thresholds where people start paying basic and higher rates.
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Rishi Sunak will announce his pandemic Budget next weekCredit: PA:Press Association
The Chancellor is reportedly plotting a stealth income tax riseCredit: PA:Press Association
That would push 1.6million people into a higher tax bracket, The Times reports.
The politician will announce in the budget on Wednesday that the point at which people begin paying the basic rate – £12,500 – will be frozen for at least three years.
The same freeze will apply to the £50,000 threshold at which people begin paying the higher 40p rate.
He will also outline plans to raise corporation tax from 19p in the pound to 25p by the end of the parliament.
That will allow the Tories to keep their manifesto pledge not to increase VAT, National Insurance or inheritance tax.
What can Brits expect in the budget?
In addition, it’s claimed he’s planning on targeting business tax and fuel duty rises to pay for the massive levels of public spending during the pandemic.
The Chancellor is also mulling increases to capital gains tax – paid on shares and other asset sales to bring it into line with income tax rates.
And during a round of TV interviews today, Mr Sunak didn’t rule out plans to increase taxes – before slashing them again ahead of the election.
He became visibly uncomfortable when quizzed on the claims by Sky presenter Sophy Ridge.
Asked if he told Tory MPs in private that he would seek to raise tax now and then cut them before the election to plug a multi-million pound hole, he said: “I don’t recognise that figure.
“Being so specific with numbers when there’s so much economic uncertainty – I don’t think anyone could do that.”
He said he wants to keep taxes as low as possible for Brits – adding: “I want to deliver our promises that we made to the British people that we would be responsible with their money, that we would look after the nation’s finances and we would deliver strong public services.
Tax hike plea
Ex-Chancellor Ken Clarke urged Rishi Sunak to consider an income tax rise even though it would break a Tory manifesto vow.
He told the BBC: “Sensible people know in their bones all this emergency government spending is going to have to be paid for and is going to be a burden on them.
“Authors of the manifesto had no idea this massive economic blow was about to hit.
“I think in the short-term what we need to do is protect the economy and keep supporting the economy through the road map.
“Over time, what we need to do is make sure our public finances are sustainable.
“That isn’t going to happen overnight, that’s going to be work that takes time given the scale of the shock that we’ve experienced, but if you’re asking do I want to deliver low taxes for people, of course I do.”
He said he wants to “level with people” about the problems facing the economy.
Warning that Covid-19 has had an “enormous hold on our economy”, he added: “I want to level with people about that, about the problem that causes and the challenges it presents us with and be honest about our plan to address those.
“We do have a challenge in our public finances and if we don’t do anything borrowing will continue to be at very high levels even after we’ve recovered from Covid, debt will continue to rise indefinitely and that’s not a good situation.”
He was also questioned by the BBC’s Andrew Marr, who asked if plans to level out after the pandemic “must mean tax rises”.
Home buy aid
First-time buyers and current homeowners will be able to get mortgages on properties up to £600,000 with five per cent deposits.
On Wednesday the government will outline to lenders how it will guarantee the other 95 per cent.
PM Boris Johnson said: “I want generation rent to become generation buy.
“Young people shouldn’t feel excluded from the chance of owning their own home.”
But Mr Sunak refused to comment on future tax policy, acknowledging it was “frustrating” for viewers.
“I’d like to be able to talk about this now and just can’t,” he said.
Despite reports that Mr Sunak’s plans will allow the Tories to stick by their manifesto pledges not to raise income tax, VAT or National Insurance, he refused to comment further today – leading to Marr quipping predicted headlines of “Chancellor hints he’s going to break election manifesto promises.”
During the budget, Mr Sunak will unveil a £5billion rescue package for the high street.
Furlough – currently due to end in April – is likely to be extended until the end of June, as is the £20 Universal Credit uplift.
Pubs, restaurants, shops and hair salons will get up to £18,000 each from a pandemic revival fund.
Brits can expect a package of measures to ease the sting Covid has had on the economy
He will announce the “restart” grants in a bounce-back Budget.
The funding for traders will take total government backing for businesses to £25billion since the first lockdown began last March.
Mr Sunak said last night: “There’s now light at the end of the tunnel and this £5billion of extra cash grants will ensure our high streets can open their doors with optimism.”
Under the scheme 450,000 non-essential shops will get up to £6,000 per premises to help reopen.
More than 230,000 hotels, clubs, bars, gyms and leisure firms will be eligible for grants of up to £18,000.
The Chancellor will announce other measures to create jobs and kick-start the economy.
In a further boost, he is expected to freeze both beer and fuel duty.
But he will warn he will soon start clawing back the £280billion he has borrowed to prop up the economy.
His second Budget will set out a pathway for raising corporation tax in stages from 19 to 23 per cent.
Mr Sunak will use Wednesday’s speech to “level with people” about the “enormous strains” the pandemic has put on public finances.
Beer bill cheer
Beer duty is expected to be frozen to give pubs a flying start when lockdown is lifted.
Tory colleagues have urged the Chancellor to slash 2p off the price of a pint.
But sources say he will resist that but consider higher rates on supermarket booze.
Conservative MP Jane Stevenson said: “Landlords have gone above and beyond. A cut in beer duty would be warmly welcomed.”