The UK increases corporate tax to 25% as the pandemic hits £ 407 billion

LONDON – UK Chancellor of the Exchequer Rishi Sunak announced on Wednesday that UK corporate tax will rise to 25% by April 2023 as the government aims to restore public finances in the aftermath of the Covid-19 pandemic.

In his Budget statement Wednesday, Sunak said the changes would take effect after the Bureau of Budget Responsibility, a government agency that provides independent forecasts, expects the economy to return to pre-Covid levels.

“Second, I protect small businesses with a profit of £ 50,000 ($ 69,816) or less by creating a small rate of profit that is maintained at the current rate of 19%,” Sunak told the House of Commons. “This means that about 70% of businesses – 1.4 million businesses – will remain completely unaffected.”

Above £ 50,000 a taper will be introduced so that only companies with a profit of more than £ 250,000 will be taxed at the full 25% rate.

The OBR now expects the UK economy to return to pre-Covid levels by mid-2022, with GDP growth of 4% in 2021 and 7.3% in 2022.

However, the government has borrowed a record £ 355 billion in peacetime since the start of the pandemic, 17% of GDP, and expects to borrow another £ 234 billion (10.3% of GDP) next year. Borrowing will then fall to 4.5% of GDP in 2022/23 and 3.5% in 2023/24. Underlying debt is expected to increase from 88.8% of GDP this year to 93.8% next year, peaking at 97.1% in 2023/24.

“While it is good to help people and businesses through an acute crisis like this, in normal times the state should not borrow to pay for day-to-day government spending,” Sunak said.

Second, in the medium term, we cannot allow our debt to continue to rise and given how high our debt is now, we need to pay close attention to its affordability. And third, it is wise to take advantage of lower interest rates to invest. in capital projects that can stimulate our future growth. “

Sunak also announced the freeze on personal tax thresholds, removing the “incremental benefit created if the thresholds continued to rise with inflation”.

The leader of the opposition Labor Party, Keir Starmer, accused Sunak’s budget of “repairing the cracks rather than restoring the foundations” of the British economy.

Covid response hits £ 407 billion

The budget comes as nationwide Covid-19 restrictions will be phased out over the coming months, culminating in full removal on June 21. Meanwhile, more than 20 million people in the UK have now received a first dose of vaccine.

The government has begun unprecedented public spending as the economy contracted the sharpest contraction in more than 300 years in 2020. At Sunak’s latest fiscal announcement in November, he unveiled the largest peacetime budget ever.

On Wednesday, Sunak announced a further £ 65 billion in fiscal measures for the fiscal year 2021/22, bringing the total government response to £ 407 billion since the start of the pandemic.

This included an extension of the country’s leave scheme and a £ 20 a week increase for Universal Credit, the UK’s Social Security benefit, until September, along with £ 5 billion in additional grants to businesses to help reopening.

As of April, non-essential shops will receive grants of up to £ 6,000 per property, while catering and leisure venues, opening later in line with the government’s phased relaxation of restrictions, will be eligible for up to £ 18,000.

The Coronavirus job retention scheme will continue to subsidize 80% of workers’ wages on leave until the end of September, but companies will be asked to contribute 10% in July and 20% in August when the economy reopens.

Sunak also extended the reduced 5% VAT rate (a value added sales tax) to September 30, along with continued corporate and stamp duty cuts and further subsidies to self-employed workers.

The limit for contactless bank card payments is being raised to £ 100 in an effort to further liberate consumer spending.