Budget will focus on shoring up British economy
Chancellor Rishi Sunak is expected to add a number of levies to the British taxpayer’s bills in a bid to improve public services and pay off soaring national debt post-Covid. So, what new changes will the Budget introduce?
National Insurance rise – Having already been announced in September, a 1.25 percent rise in National Insurance contributions will be felt by UK workers as well as earning pensioners, raising around £12bn a year for government revenue.
Dividend tax – Taxes on dividends (money earnt from shares) will rise by 1.25 percentage points from April, to 8.75 percent for basic-rate income taxpayers and 33.75 percent for higher-rate payers. The £2,000 tax-free personal allowance will stay the same. The increase will raise around £600million.
A green gas levy – Britons with traditional gas boilers will be hit by a green energy surcharge which is expected to add hundreds to bills. This levy is designed to encourage homeowners to switch to green heating options like biomass boilers, condensing boilers, and heat pumps, as part of the plan to reach net zero by 2050.
Council tax – Under the Conservatives, council tax has risen every year for the last decade, and it is highly likely Mr Sunak will allow local authorities to continue this trend, which could push the annual bill for the average band D property up to approximately £2,000.
A higher alcohol tax, a deduction in the tax-free Lifetime Allowance for pensioners, and a lower earnings threshold for graduates to re-pay student loans, are all thought to be on the Conservative agenda too.
These levies are vital to getting the economy and the NHS back on their feet, the Conservative party have claimed, but the changes have been widely criticised from all sides of the political spectrum.
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Rishi Sunak is expected to raise taxes in his Budget plan
Ahead of the Budget reveal, veteran political journalist Andrew Marr asked Mr Sunak whether he is going to be known as a tax-cutting chancellor by the end of this term of parliament.
Mr Sunak responded by saying: “Of course, my instincts are to do that, that’s what I believe.
“I want people to be able to keep more of their money, I want to reward people for working, I think that is a good thing and I think that will help drive economic growth.
“But as we discussed, I’ve also had to grapple with an economic shock – the biggest in 300 years – borrowing at the highest since World War Two, and things like the elective backlogs in the NHS which we want to make progress on.
“So those are some of the challenges in the short-term.”
At the beginning of September, the Government’s decision to introduce a 1.25 percent rise to National Insurance tax was slammed as a tax that would hit working class families the hardest, whilst leaving the rich relatively untouched.
Torsten Bell, Chief Executive of the Resolution Foundation, said: “Tax rises will be needed to deliver decent social care, but a National Insurance rise is a terrible way to raise the funds required.
“It’s a tax disproportionately loaded on to younger and lower-paid workers, compared to a fairer rise in income tax.
“Why we would target a tax rise on the groups who have been hardest hit by the economic impact of this pandemic while exempting older and wealthy individuals, is completely beyond me.”
Calls for a Wealth Tax instead of a National Insurance hike have been wide-spread, with experts arguing that five times more revenue could be raised.
Richard Burgon, MP for East Leeds, argued: “If we put a 10 percent tax on the wealth of those with over £100million, we would raise £69billion.
“A wealth tax is how we should fund much-needed investment in social care – not a hike in National Insurance contributions that will hit the lowest paid.”
Research conducted by Tax Justice UK found there is significant support for taxes on wealth, with 74 percent of people wanting to see wealth taxed more, including 64 percent of Conservative voters and 88 percent of Labour voters.
Conservative support for higher corporation tax leapt from 61 percent in March to 74 percent in June 2020, and 75 percent of Conservatives supported a mansion tax on homes worth over £2million.
But so far, tax rises have targeted working Britons and earning pensioners, rather than those born into wealth.
Mr Sunak and his wife have a higher net worth than the Queen
At the recent Conservative Party Conference, however, Mr Sunak claimed to sympathise with ordinary, hard-working families who find it difficult to save and are commonly underpaid.
He said: “Picture this, you’re a young family, you work hard, saving a bit each month, but it’s tough.
“You have ambitions for your career’s, for your children, you want to give them the best, more than you had.
“Now you tell me, is the answer to their hopes and dreams just to increase their benefits?”
Mr Sunak’s net worth is estimated at £200million, and he is married to the daughter of the sixth richest man in India, who is estimated to be worth trillions.
Akshata Murthy, Mr Sunak’s wife, already holds shares in her father’s company of £430million, which is more than the Queen’s net worth (£350million).
Which taxes do you think Rishi Sunak should attack tomorrow? Let us know in the comments section below.
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