Chancellor Rishi Sunak has set out new measures to support the UK’s recovery from Covid-19, including an extension to the furlough scheme and a future increase in corporation tax.
The Coronavirus Job Retention Scheme will be extended until the end of September and the Self-Employment Income Support Scheme (SEISS) will?continue with additional grants. Around 600,000 more self-employed people will be eligible for financial help as access to grants is widened.
Meanwhile, there will be a freeze on the income tax personal allowance and higher rate threshold from next year until 2026.
The rate of corporation tax will go up to 25%, but this will not take effect until 2023 in order to support the recovery. The new rate will still be the lowest in the G7, Sunak noted.
There will also be protections for smaller businesses. Firms with profits of £50,000 or less, which represents around 70% of actively trading companies, will continue to be taxed at 19% and a tapered rate will be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
The Chancellor also unveiled a two-year “super deduction” scheme, allowing companies to reduce their tax bill by 130% of the cost of new investments.
According to new estimates from the Office for Budget Responsibility, the UK economy will grow by 4% this year and return to its pre-pandemic size six months sooner than previously expected.
The pace of growth is forecast to strengthen to 7.3% in 2022, followed by growth of 1.7%, 1.6% and 1.7% in subsequent years.
Unemployment is now expected to peak at a lower rate of 6.5%.
Sunak said that Covid-19 had caused “acute” damage to the UK economy and it would take the country, and the whole world, “a long time to recover from this extraordinary economic situation”.
But he added: “We will recover.”