Rishi Sunak plots tax raid on parcels and freelance workers

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Rishi Sunak will announce a £5 billion fund to help high street pubs, restaurants and non-essential shops - Henry Nicholls/Reuters
Rishi Sunak will announce a £5 billion fund to help high street pubs, restaurants and non-essential shops - Henry Nicholls/Reuters

Rishi Sunak is plotting a new tax on online deliveries next month and a raid on the self-employed later this year, The Telegraph can reveal.

The Chancellor will use Wednesday's Budget to announce a £5 billion fund to help high street pubs, restaurants and non-essential shops that have remained closed as a result of the Covid lockdown.

On March 23 – dubbed "tax day" in Whitehall – he will then unveil a series of consultations on further tax increases to start paying for the £300 billion cost of dealing with the virus crisis.

The Telegraph has learnt that this will include options to tax online retail more heavily, including the possibility of a new green tax on every internet delivery, alongside other online tax ideas. However, it is understood that he has turned his back on a mooted windfall tax on the "excess profits" of internet companies.

Mr Sunak is also planning to use a Budget in the autumn to increase National Insurance Contributions paid by Britain's 4.5 million self-employed, arguing that they too benefited from state support in the pandemic.

A Treasury source said: "The idea of an online sales tax is being looked at as part of the business rates review. "Responses to the consultation are being considered in the round, but the Chancellor is cognisant of the need to level up the playing field between the high street and online taxation."

Sources said Mr Sunak's concerns about the different tax treatment of the employed and self-employed have not changed since his first Budget last March. He said then: "It is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all 'pay in' equally in future."

There is likely to be an increase in capital gains tax, which is paid on shares and company assets, from 28 per cent to 40 per cent to align the rates with income tax, but the timing remains unclear. Mr Sunak is also considering freezing personal income tax allowances in a move that could bring in up to £6 billion by 2024-25.

The Tory party's 2019 manifesto committed to no increases in VAT, inheritance tax and National Insurance but left the door open for rises in capital gains tax and corporation tax.

The news came as it emerged, days ahead of the Budget:

  • Entrepreneurs could be spared from an expected hike in corporation tax from 19 per cent to as much as 25 per cent by 2024, with a lower rate introduced for smaller businesses which was axed by George Osborne six years ago;

  • Britain's growing green economy will receive a major boost when Mr Sunak on Sunday confirms £22 billion for a new UK infrastructure bank ahead of the United Nations climate change conference in Glasgow in November;

  • Companies could be given National Insurance holidays to hire new staff after government support measures come to an end as part of the Government's focus on jobs;

  • New research found that Conservative Prime Ministers have pushed through more than 1,000 tax rises at a rate of nearly one every three days since 2010.

  • Tens of thousands of young people will be able to get onto the housing ladder in a Government-backed mortgage scheme to ensure that lenders can issue mortgages to first-time buyers and home owners covering 95 per cent of a home's value up to £600,000.

On Sunday, Mr Sunak will announce that firms in retail, hospitality, accommodation, leisure and personal care will benefit from the new £5 billion Restart Grant scheme as the economy reopens. Shops, pubs, clubs, hotels, restaurants, gyms and hair salons will be among nearly 700,000 companies eligible for new direct cash grants of up to £18,000.

The funding – which takes the total spent on direct grants to businesses during the pandemic to £25 billion – will ensure that firms can reopen and get going again as restrictions ease and people return to their high streets.

Mr Sunak said on Saturday night: "Our local businesses have been hit hard by the pandemic, which is why we went big and went early with a multi-billion pound package of support. There's now light at the end of the tunnel, and this £5 billion of extra cash grants will ensure our high streets can open their doors with optimism."

The Restart Grants will replace the monthly Local Restrictions Support Grant (Closed) and Local Restrictions Support Grant (Open), which will both close at the end of March.

Elsewhere in the Budget, Mr Sunak will extend the key virus support packages in line with Boris Johnson's roadmap for lifting lockdown by late June.

The Chancellor is expected to announce the continuation of business rates relief beyond the end of March, when it was due to expire. He will also keep subsidising employers' wages through the furlough scheme, which will now be phased out in the summer, in an attempt to prevent a surge in joblessness while the UK races to vaccinate its population.

That came after 45 Conservative MPs from Northern "Red Wall" seats made a major pre-Budget intervention to urge Mr Sunak to make "a bold move to reduce business rates" on retail as soon as possible.

MPs from the Northern Research Group, including Jake Berry, Dehenna Davison, James Grundy and Simon Fell, said: "With many of our town centres hit particularly hard by the Covid-19 pandemic, now is the time for a bold move to reduce business rates nationally."

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