The Budget Summary 2021/22
The Chancellor had a difficult task in this Budget: to indicate how he might balance the Government’s books in the future, while still having to pay out huge sums to support the economy. He said that he would continue to provide ‘whatever it takes’ to protect businesses and jobs during the present crisis, while being honest about the need to ‘fix the public finances’ and setting out his plans to build the future economy.
After spending so much, it was inevitable that Mr Sunak would have to raise taxes somewhere – but he was bound by an election promise not to raise the rates of Income Tax, National Insurance Contributions or VAT during the life of the Parliament. There has been speculation that he might reduce relief for pensions or bring Capital Gains Tax rates in line with Income Tax. In the event, neither was mentioned; we are promised consultation documents on 23 March that may raise those possibilities, but they are not an immediate prospect. Instead, Corporation Tax will go up – not until 2023, and after extra tax reliefs have been offered for investment in the meantime. There will also be the less visible effect of freezing personal allowances and other reliefs until 2026, increasing the tax take year by year as inflation pushes more people over the limits.