LONDON — Corporations will see taxes on their U.K. profits rise to 25 percent from 2023 as Chancellor Rishi Sunak moves to plug the U.K.’s budget black hole.
Announcing the policy on Wednesday, Sunak insisted he was being “honest” and “responsible” about the need for the rise, and warned it would take the U.K. government many decades to pay back a £407 billion pandemic support bill that has taken U.K. borrowing to its highest peacetime level.
Sunak unveiled a raft of extra short-term support for businesses and individuals in his Spring budget after the U.K. government said lockdown measures would not be eased until at least the end of June. The government’s budget watchdog, the Office for Budget Responsibility, said it expects the U.K. economy to grow by 4 percent this year, compared with a forecast of 5.5 percent given in November. But growth in 2022 is forecast at 7.3 percent, up from the 6.6 percent predicted last year.
The chancellor has been under pressure from both Tory MPs and opposition Labour Party MPs to delay, and even ditch, tax rises amid fears it will choke off the U.K.’s recovery from the pandemic.
The U.K. corporation tax rate is currently the lowest of the G7 group of the world’s wealthiest nations, and Sunak insisted the country’s economy would remain competitive even after the increase. The chancellor said he would also freeze the threshold for paying the basic rate of income tax until 2026, after next year’s increase to £12,570.
Suank, who insisted protecting jobs was his “highest priority,” had earlier confirmed the U.K. government’s job furlough scheme, which pays 80 percent of employees’ wages for the hours they cannot work in the pandemic, will be extended until the end of September. He also announced 600,000 more self-employed people will be eligible for government help as access to grants is widened.
His package of measures meanwhile included an extension to the 5 percent reduced rate of VAT for tourism and hospitality, an extension to the business rates holiday and more access to loans and grants for businesses.
Temporary changes to the point at which stamp duty in England and Northern Ireland is paid were also extended until the end of September. An uplift in the Universal Credit welfare benefit scheme was extended following pressure from MPs in the chancellor’s own party.