British Finance Minister Rishi Sunak announced Wednesday, March 3, 2021, that the government was starting to plan for the post-pandemic and that after that would go through a tax hike and a freeze of tax thresholds.
UK government freezes tax thresholds from 2022 to 2026
While the French government remains stuck on its ” whatever the cost “, Our neighbors across the Channel are already planning the post-pandemic and are counting on an increase in taxes and a freeze of taxable thresholds to get by. UK Finance Minister Rishi Sunak presented the country’s new budget to MPs on Wednesday 3 March, saying: “ Once on the road to economic recovery, we will need to start repairing public finances. “.
A statement that says a lot about the intentions of Her Majesty’s government. Rishi Sunak recalled that to support the country’s activity in the midst of a global pandemic, the government had so far spent 280 billion pounds (324.24 billion euros), even though the country was losing 9.9% of its GDP. A situation which caused the country’s debt to rise by 316 billion pounds. A situation which cannot continue like this and which must be thwarted by the implementation of new financial policies.
If the government had promised not to raise income tax rates, it can easily play on the thresholds to increase public revenue without perjury. Thus, the Minister of Finance announced that for the period from 2022 to 2026, the taxable income thresholds would be frozen. The threshold is thus frozen at 12,500 pounds for the base tax rate of 20% and at 50,000 pounds for the high bracket of 40%.. This threshold game technique will save the UK government £ 6 billion annually.
UK gradually increases corporate tax rate
Another point announced by the Minister of Finance, the increase in the corporate tax rate, which will go from 19% to 25%. However, Rishi Sunak assures that this increase will not take place before 2023, before allowing companies to emerge from the crisis. Every point of increase will bring in £ 3.3 billion a year.
However, the increase in this corporate tax will not affect SMEs with a profit of less than 50,000 pounds. The latter represent 70% of companies. The taxation will be progressive between 19% and 25% depending on the profit. Above £ 250,000 in profit, the business will be taxed at 25%, which is the top 10% of businesses. Rishi Sunak recalls that despite this increase the UK corporate tax rate will remain the lowest in the G7.
This increase in tax revenue will allow the UK to meet future spending. The Office of Budget Responsibility, in charge of the country’s economic forecasts, estimates that the United Kingdom should return to its pre-pandemic economic level by mid-2022 and experience growth of 4% in 2021 and 7.3% in 2022, before the latter stabilizes at around 1.6%.