Chancellor of the Exchequer Rishi Sunak holds the budget box in front of 11 Downing Street in central London ahead of the Spring Declaration announcement at the House of Commons on March 3, 2021 in London, England.
Wiktor Szymanowicz | Barcroft Media | Getty Images
LONDON – UK Treasury Secretary Rishi Sunak announced on Wednesday that UK corporation tax will rise to 25% in April 2023 as the government tries to restore public finances following the Covid-19 pandemic.
In its budget statement on Wednesday, Sunak said the changes would take effect after the Bureau of Budgetary Responsibility, a public body that provides independent projections, expects the economy to return to pre-Covid levels.
Second, I protect small businesses with profits of £ 50,000 ($ 69,816) or less by creating a small profits rate that is held at the current rate of 19%, “Sunak told the House of Commons. “This means that around 70% of companies – 1.4 million companies – remain completely untouched.”
Above £ 50,000 a taper will be introduced so that only companies with a profit greater than £ 250,000 will be taxed at the full 25% tax rate.
The OBR now expects the UK economy to return to pre-Covid levels by mid-2022. GDP will grow by 4% in 2021 and 7.3% in 2022.
However, it also warned that five years from now the economy will still be 3% below its pre-pandemic rate.
The government has set a peace record of £ 355 billion, 17% of GDP, since the pandemic broke out, and expects to borrow an additional £ 234 billion (10.3% of GDP) next year. Borrowing will then drop to 4.5% of GDP in 2022/23 and to 3.5% in 2023/24. Underlying debt is projected to rise from 88.8% of GDP this year to 93.8% next year, peaking at 97.1% in 2023/24.
“While it is right to help people and businesses in an acute crisis like this, in normal times the state should not borrow to pay for day-to-day public expenses,” Sunak said.
Second, in the medium term, we cannot allow our debts to grow any further, and given the size of our debts, we must pay close attention to their affordability. Third, it makes sense to use lower interest rates to invest in capital projects that can fuel our future growth. “
Sunak also announced the freeze on personal tax thresholds, eliminating the “added value created when thresholds continued to rise with inflation”.
Labor opposition leader Keir Starmer accused Sunak’s budget of “papering the cracks rather than rebuilding the foundations of the UK economy”.
Covid’s answer is £ 407 billion
The budget will be provided as the nationwide Covid-19 restrictions will be gradually lifted in the coming months and will be fully removed on June 21. More than 20 million people in the UK have now received a first dose of vaccine.
The government embarked on unprecedented public spending as the 2020 economy saw its sharpest decline in more than 300 years. At Sunak’s last budget announcement in November, he unveiled the country’s largest peace budget ever recorded.
On Wednesday, Sunak announced further budget measures worth £ 65 billion for FY 2021/22, bringing the total government response since the pandemic started at £ 407 billion.
This included an extension of the country’s vacation program and a weekly increase in the Universal Loan, UK Social Security payment, by £ 20 per week, plus an additional £ 5 billion in grants to businesses to help reopen.
As of April, non-essential retail stores will receive grants of up to £ 6,000 per building, while hospitality and leisure establishments later opened in line with the government’s gradual easing of restrictions can receive up to £ 18,000.
The coronavirus job retention program will continue to subsidize 80% of the wages of workers on leave through September. However, companies are being asked to contribute 10% in July and 20% in August when the economy reopens.
Sunak also extended the reduced VAT rate of 5% (VAT) through September 30, along with further reductions in business rates and stamp duty, as well as other self-employed grants.
Contactless debit card limit will be increased to £ 100 to further relieve consumer spending.