Rishi Sunak on brink amid plan to ‘raise pension tax’: ‘It won’t be popular’
Rishi Sunak says ‘all support will be reviewed in budget’
The UK is headed towards a ‘double-dip recession’ according to reports as the impact of the pandemic and lockdown measures takes its toll. The Department of Health unveiled figures last week that showed cases had dropped by two thirds in the UK since the first week of January, but the economy continues to suffer. The services sector – accounting for 80 percent of the economy – has seen its activity drop from 49.4 in December to 38.8 in January, as highlighted by the IHS Markit/Cips purchasing managers index. Anything below 50 percent indicates an economy is shrinking.
Chancellor Rishi Sunak will be unveiling his budget in March, and will be tasked with recouping funds in order to pay for the expense accrued from various support measures such as the job retention scheme.
Inheritance tax, capital gains tax and increased contributions from the self-employed have all been suggested as solutions, but one tax expert claims pensioners should be targeted.
Professor Judith Freedman, a tax expert at the University of Oxford, said in October: “If you are looking at broadening the base, people in receipt of pensions should be within your purview because they are not paying national insurance on those pensions.
“I don’t think it will be popular but I think it probably should be done.”
However, the Financial Times reported this week that Mr Sunak has agreed to maintain the triple-tax lock on pensions amid growing pressure within the Conservative Party.
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Some Treasury figures had reportedly hoped that Mr Sunak would abandon the pledge, given he has spent roughly £280billion fighting the impact of the COVID-19 pandemic.
UK borrowing is expected to hit £400billion for the 2020-21 financial year, marking the country’s highest budget deficit outside wartime.
The Government may have opted to preserve its election manifesto pledge from 2019.
However, this could leave others vulnerable to tax rises.
This is Money reported late last year that Mr Sunak could launch a “multi-billion pound tax raid”.
In November, the Chancellor commissioned a report looking into economic solutions for the pandemic.
The Office of Tax Simplification published the report, and laid out plans for a “£14billion tax raid” by the Chancellor.
Tom Selby, senior analyst at AJ Bell, said landlords, those with a holiday home and pensioners could be the big losers.
He said: “Landlords would be among the biggest losers from a capital gains tax hike, as second properties are subject to capital gains tax when they are sold.
“The same would be true for anyone who wants to sell a holiday home.
“Because second homes can’t be held in a pension or Isa and are difficult to sell in small chunks to take advantage of the annual exemption, a disposal is more likely to generate a significant capital gains tax bill.”
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Tax Research UK’s Richard Murphy told Express.co.uk that Mr Sunak failed to take the pandemic seriously.
He also warned against tax hikes, warning the UK could then head for a “depression”.
He said: “At first, Rishi Sunak completely underestimated what was going to happen, it was a complete disaster, because he hadn’t realised how disastrous coronavirus was going to be.
“But he was back a week later with the furlough scheme, it was smart, quick, some people lost out when they shouldn’t have done.
“But overall it has worked and they did a good job – but now Sunak’s obsession with debt is kicking in again.
“If he opts for austerity and tax hikes, then frankly we are heading for depression rather than a recession.”
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