This years highly anticipated Budget will be watched closely by many as Chancellor Rishi Sunak sets out the UK’s economic recovery, following the coronavirus pandemic.
The Chancellor will outline the state of the economy and the government’s plan to either raise or lower taxes. The Budget will also forecast how the UK economy could perform in the future.
In this year’s Budget, the Chancellor is under pressure to address whether the UK will begin paying off the huge debts from the pandemic and how the government is planning to support people and businesses who have been hit hardest during the pandemic.
The government has borrowed £271bn for this financial year, which is £222bn more than the previous year. This year’s borrowing has pushed the national debt to £2.13 trillion, which is more than 99% of GDP.
One way in which the government can raise funds is by increasing taxes. The three main taxes are:
- Income tax – a tax on earnings, usually taken from your pay before you receive it
- National Insurance Contributions – a tax on earnings, paid by workers and employers
- VAT – a tax added to the price of many goods and services
The Conservative Party stated in their 2019 manifesto that they would not increase these taxes however, the Chancellor could argue that circumstances have changed.
In 2019/20 UK taxes were collected as follows:
- Income tax – £194bn
- National Insurance Contributions – £145bn
- VAT – £132bn
- Corporation tax – £52bn
- Council tax – £36bn
- Capital taxes – £31bn
- Business rates – £29bn
- Fuel duty – £28bn
The Chancellor has also been under pressure to address whether some temporary measures, introduced to support people and businesses during the pandemic, will be extended.
Firstly, many have called for the Chancellor to extend the £20 weekly increase to universal credit, as this is set to end on 31st March. There are also calls to keep the stamp duty holiday in place to continually boost the housing market, as this is also set to end on 31st March. Lastly, many are asking for the Furlough Scheme to be extended, whilst also offering more support for those self-employed who have missed out during the pandemic.
The Budget will be announced this week on Wednesday 3rd March at around 12.30pm.