Those earning over £19.5k ‘should pay higher taxes to cover Covid bill’

UK taxpayers earning more than £19,500 should face a chunky tax rise to help rebuild the country’s coronavirus hit economy.

This is according to think tank The Resolution Foundation, which has said that a £40billion tax increase could come into fruition in the next few years to reduce the country’s massive mountain of debt.

In the first six months of the 2020/21 financial year, the Government borrowed an eye-watering £208billion to help cover the costs of the pandemic and fund the nationwide furlough scheme.

This was up by £175billion compared to the first half of 2019/20.

The Resolution Foundation suggested a ‘health and social care levy’ could help reduce that, which would be a 4% tax on all incomes over £12,500.

This would then be offset by a 3% cut to employee national insurance contributions and the abolition of Class 2 National Insurance contributions for the self-employed.

It said the shift – which would raise £17billion a year – would not penalise those worst-hit by the virus, such as the lowest paid households and self-employed, the Mirror reports.

“These offsets would leave employees earning £19,500 and below better off, as well as self-employed workers earning less than £17,000,” the study said.

A “pandemic profit levy” on businesses that have benefited from the pandemic has also been suggested, which could include online retailers and supermarkets.

Meanwhile, an increase in corporation tax from 19% to 22% would raise £10billion, the foundation said. It also put forward wealth rises of £9billion, including restrictions on capital gains and inheritance tax reliefs, and another increase in council tax on homes worth more than £2million.

It comes after a report commissioned by Chancellor of the Exchequer Rishi Sunak suggested that capital gains tax should be doubled to help a post-Covid UK economy.

The Office for Tax Simplification (OTS) said the tax, levied at 10% for basic-rate taxpayers and 20% for higher-rate taxpayers, could be doubled if it were brought in line with income tax.

Capital gains tax is the levy you pay on the profits – or gain – that you make when you sell, give away or dispose of something you own, such as property.

Currently, the first £12,300 of capital gains is exempt. But if scrapped, the measure could raise £14billion annually.

Resolution Foundation research director James Smith said: “The Chancellor should combine tried and tested revenue raisers with major reform of wealth taxation and a new health and social care levy. This would ensure that post-Covid tax rises reflect the very uneven nature of this crisis, but also play a part in building a better country after it.”

Lancs Live – Cumbria