Budget 2021: Working Families Could Miss Out on Tax Cut
Britain’s working class might have to miss out on a possible tax cut starting April this year. Finance minister Rishi Sunak is contemplating removing the expected rises in Income Tax allowance in order to lessen the negative effects of the COVID-19 pandemic.
As of today, the personal tax allowance stands at £12,500. This was set to rise to £12,562 in April, but now the Chancellor is considering axing that increase. A savings move like this is considered a ‘stealth’ tax and thought of as easy to implement without raising too much objection.
While £12.50 a year may not look like a significant amount, this was supposed to be the start of bigger tax breaks for the people down the road. Now, however, the pandemic has changed the scenario and people may have to wait longer to receive any meaningful tax breaks.
The threshold at which people start paying 40% tax was also supposed to rise to £50,250 from £50,000. This would have saved families £62.50 per year.
When approached, the Treasury spokesman did not offer any comments on the subject, only matters strictly related to what is already known about the next month’s budget.
The Resolution Foundation think tank considers axing the tax allowance as a less painful way of raising money. It is a form of tax that is much more easily accepted by the general public compared to raising income tax. It provides an easier way to generate funds via classic stealth tax methods.
The deputy director of Resolution Foundation also advised the government to raise the Corporation Tax to 22% from the current 19%. Such a move would reverse a fraction of the tax benefits corporations have received from previous governments. He said tax rises worth about £40 billion are needed for the government to repair the damages caused by the pandemic. Freezing tax thresholds for 4 years will only raise about £6 billion.
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