Rishi Sunak considering pensions tax hike to plug coronavirus finance gap

Monday, 31st August 2020, 3:04 pm
Updated Monday, 31st August 2020, 3:04 pm
Chancellor Rishi Sunak is considering a tax on pensions (Getty Images)

Tax hikes of up to £20 billion are being considered by the Treasury to deal with the cost of the coronavirus crisis, according to reports.

Ministers are looking at raising capital gains tax and corporation tax in the November Budget, the Sunday Times has reported.

The money could be clawed back from pensions, businesses, the wealthy, and foreign aid, the newspaper said.

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Chancellor Rishi Sunak is considering hiking corporation tax from 19% to 24% in order to boost revenue by £12 billion next year, the report indicated.

Capital gains tax might also be paid at the same rate as income tax, under the ideas being looked at.

Pensions and inheritance tax both considered

Pension tax relief could be “slashed” under measures being considered by the Treasury to help pay for the Covid-19 crisis, the Sunday Telegraph reported.

The newspaper said that raising fuel and other duties was also being looked at.

A revamp of the inheritance tax system and the introduction of an online sales tax was also being considered.

The international development budget could also be caught up in Treasury reappraisals due to the cost of the pandemic, it was claimed.

The aid budget has already been cut by £2.9 billion from £15.8 billion this year, due to the contraction in the economy caused by the Covid-19 outbreak.

However, the Government insists it still meets its obligation to provide 0.7% of gross national income (GNI) to international development.

Tory backlash

The prospect of such large tax spikes prompted concern from a number of Conservative MPs.

Backbencher Marcus Fysh said “counter-productive” tax rises were the wrong response to the current situation.

He told the PA news agency: “The focus has to be building on the nascent recovery in the economy which is the surest way to maximise the number of jobs available and balance revenue with spending.

“We must not risk it with talk of counter-productive tax rises.

“I am sure the Chancellor is well aware of this and hope he will consider urgent fiscal incentives to boost activity, investment and productivity.”