Chancellors Budget in a month’s time could see triple tax lock broken
The triple tax lock could still be broken with increases to income tax and/or VAT, say leading tax and advisory firm, Blick Rothenberg
Nimesh Shah, CEO at the firm said: “ The Chancellor has his hands tied because of the Conservative manifesto pledge to not raise the ‘big 3’ taxes – income tax, National Insurance and VAT, the so-called ‘triple lock’.
Income tax, National Insurance and VAT account for almost three quarters of the Government’s total tax revenue, so the Chancellor remains severely constrained if he cannot pull these tax levers.
“ However, I wouldn’t rule out the Government making tentative steps to break the triple lock and announcing a future universal increase to income tax and/or VAT citing that these are ‘unprecedented’ times.”
He added: “ A 1% increase to the basic rate of income tax would raise £4.7 billion and the mechanisms are already in place to quickly collect the funds through the PAYE and Self-assessment systems.”
Nimesh said: “ 12 months ago, the now Chancellor, Rishi Sunak would not have imagined that he would have been delivering his second Budget following countless announcements throughout 2020 and a package of economic support not seen in the modern peacetime.”
He added: “ This Budget is very different to Sunak’s first – it comes with the threat of tax increases that have been building since he announced the furlough scheme last March, and the question of when and how the country would start to repay the cost of the coronavirus pandemic.”
Nimesh said: “ When the 3rd of March Budget date was announced in December, there was immediate speculation that this Budget would signal the start of universal increases to tax – it’s the earliest Budget date for some years and the theory was that the Chancellor would announce various tax increasing measures which would take effect from 6 April.”
He added: “ Since the Budget announcement the landscape has completely changed with another national lockdown, which was not anticipated at the time. It is now very questionable whether this Budget is the right time for dramatic tax changes – schools will not have re-opened and the lockdown restrictions barely eased. The Chancellor could shelve the Budget altogether or use the opportunity to introduce a further package of support for businesses to aid the economic recovery.
“We shouldn’t rule out the furlough scheme being extended again, which is due to close at the end of April (but we have heard that before from the Chancellor). Don’t rule out the Chancellor kicking the Budget in touch for now, which may be the perfect answer.”