Britain’s Chancellor of the Treasury, Rishi Sunak, participates in a national “applause for caregivers” to show appreciation for the work of the British National Health Service (NHS) workers and frontline medical staff throughout the country while fighting the coronavirus pandemic, on the stairs of the Foreign and Commonwealth Office (FCO) on April 16, 2020 in London.
Tolga Akmen | WPA Pool | Getty Images
LONDON – British Finance Minister Rishi Sunak announced on Wednesday that UK corporate tax would rise to 25% in April 2023, as the government seeks to restore public finances after the Covid-19 pandemic.
In his budget statement on Wednesday, Sunak said the changes will take effect after the Office for Budget Responsibility, a public agency that provides independent forecasts, expects the economy to return to the level prior to Covid.
“Secondly, I am protecting small businesses with profits of £ 50,000 ($ 69,816) or less by creating a small profit rate, maintained at the current rate of 19%,” Sunak told the House of Commons. “This means that about 70% of companies – 1.4 million companies – will not be affected.”
Above £ 50,000, a gradual reduction will be introduced so that only companies with profits in excess of £ 250,000 will be taxed at a total rate of 25%.
GDP forecasts
OBR now expects the British economy to return to its pre-Covid level in mid-2022, with GDP growing 4% in 2021 and 7.3% in 2022.
However, the government has borrowed a record £ 355 billion peacetime record since the start of the pandemic, 17% of GDP, and expects to borrow another £ 234 billion (10.3% of GDP) next year. Debt then drops to 4.5% of GDP in 2022/23 and 3.5% in 2023/24. The underlying debt is expected to increase from 88.8% of GDP this year to 93.8% next year, reaching 97.1% in 2023/24.
“While it is right to help people and businesses during an acute crisis like this, in normal times, the state should not take out loans to pay for daily public spending,” said Sunak.
“Secondly, in the medium term, we cannot allow our debt to continue to increase and, given how high our debt is now, we need to pay close attention to its affordability. And, thirdly, it is wise to take advantage of interest rates more low to invest in capital projects that can boost our future growth. “
Sunak also announced a freeze on personal tax limits, removing the “incremental benefit created if the limits continue to increase with inflation”.
Covid’s response reaches £ 407 billion
The budget comes at a time when Covid-19’s national restrictions are expected to be phased out over the next few months, culminating in total removal on June 21. Meanwhile, more than 20 million people in the UK have already received the first dose of the vaccine.
The government embarked on unprecedented public spending on the economy, registering its sharpest contraction in more than 300 years in 2020. In Sunak’s last fiscal announcement in November, it revealed the country’s largest peacetime budget ever recorded.
On Wednesday, Sunak announced another £ 65 billion in fiscal measures for the 2021/22 fiscal year, bringing the total government response since the start of the pandemic to £ 407 billion.
This included an extension of the country’s license scheme and an increase of £ 20 a week for Universal Credit, the British social security payment, until September, along with £ 5 billion in additional subsidies for companies to help with the reopening.
Starting in April, non-essential points of sale will receive subsidies of up to £ 6,000 per location, while hospitality and leisure establishments, which will open later in accordance with the gradual reduction of government restrictions, will be eligible for up to £ 18,000.
The Coronavirus Jobs Retention Scheme will continue to subsidize 80% of released employees’ wages until the end of September, but companies will be asked to contribute 10% in July and 20% in August, as the economy reopens.
Sunak also extended the 5% VAT rate reduction (a value-added sales tax) until September 30, along with continued reductions in business and stamp duty rates and other concessions to freelancers.
The limit for contactless bank card payments will increase to £ 100 in an attempt to further release consumer spending.