With less than a month to go until the Chancellor announces his March Budget, Rishi Sunak is reportedly considering a number of tax rises.
The Chancellor is now facing the task of repaying the £400billion deficit, caused by the coronavirus pandemic. Rumours have been circulating in parliament regarding how the Chancellor plans to deal with the deficit.
Tax changes could be implemented as soon as April or the Chancellor could wait until the end of the year to see if further support is needed for businesses and workers, during the pandemic.
There are 5 taxes that could potentially be increased/introduced in the Budget:
Self-employed workers to pay more
Currently those who are self-employed/freelancers pay lower rates of National Insurance compared to rates that employees pay. There are rumours that these rates could be brought in line with employee’s rates, as Rishi Sunak has said that everyone who benefited from state help during the pandemic, would have to pay the same in future.
This increase would be a challenge for freelancers as they have struggled throughout the pandemic and relied on government aid to keep them afloat. The Institute for Fiscal Studies have said that it is unfair that those who are self-employed will pay £3,300 less tax on a £40,000 salary, than someone who is employed.
Increasing corporation tax
It is understood that the Chancellor believes the fairest way to raise revenue is by forcing businesses to pay more corporation tax. Many businesses have either profited from the pandemic or been handed state funds.
Britain currently has the lowest corporation tax rate in the G7 at 19%. Raising the rate to 21% would raise £6.8billion a year by 2024.
Higher capital gains rates
By increasing capital gains rates and lowering the reliefs, it could raise £18billion a year as up to three times as many people would have to pay. The change would impact investors and second-home owners.
Introduce a new property tax
Plans have been considered to introduce a new property tax that would see the end of council tax and stamp duty. Current council tax rates are based on house price data from 1991 and current stamp duty rates are believed to be stopping people from moving.
The new tax would fit the government’s ‘levelling up’ agenda, as it would benefit owners of lower-value homes, mostly in the North. However, the tax would affect homeowners in the South, as house prices are predominantly more expensive.
Introduce a wealth tax
By introducing a one-off wealth tax of 5% on individual property and pension assets of more than £500,000, it would raise £260billion over five years. However, Rishi Sunak is sceptical of introducing a wealth tax as it would affect more than eight million people.
The Chancellor will make his official Budget announcement on 3rd March 2021.