Chancellor Rishi Sunak plans stealth rise in income tax as he says Covid has had 'enormous toll'

Chancellor Rishi Sunak today warned the coronavirus crisis has had an 'enormous toll' on the public finances as he appeared to pave the way for a series of tax rises at the Budget on March 3.

Mr Sunak would not be drawn on the specifics of his plans amid reports he will launch a 'stealth' income tax raid, hike corporation tax and impose a new levy on online retailers.

But he said he will 'level with people' and be 'honest' on Wednesday about the scale of the challenge facing the UK as public sector debt continues to climb above £2.1trillion.

Despite not wanting to get into specifics ahead of the fiscal event, Mr Sunak gave the firmest hint yet that the furlough scheme will be extended beyond the end of April.

The Chancellor said he had vowed to 'do whatever it took to protect people, family and businesses through this crisis and I remain completely committed to that'.

Reports overnight suggested Mr Sunak could soon launch a tax raid on online businesses - including a green tax on deliveries - as part of plans to replenish the country's coffers in the wake of the Covid pandemic.

The Chancellor is apparently looking to 'level up the playing field' between online and high street businesses. A green deliveries levy on online retailers is one route Mr Sunak could take, according to the Sunday Telegraph.

The Chancellor has reportedly cooled his interest in a Covid 'windfall tax' on the 'excessive' profits website-based businesses have raked in during the pandemic.

He is also eyeing tax increases for the self-employed, along with raising an extra £6billion from income tax by 2025 with some clever threshold tactics, according to The Sunday Times.

Mr Sunak could freeze the threshold at which people start to pay the basic rate at £12,500 for the next three years while the £50,000 higher rate threshold could be kept in moves which critics have labelled a 'stealth' raid.

Such a move, which maintains the Conservative's election pledge not to raise headline rates of income tax, would drag more than 1.6million people into the higher tax bracket by the 2024 general election.

Mr Sunak is also widely expected to increase corporation tax from its current rate of 19 per cent, to as potentially as high as 25 per cent.

The tax moves would form part of a strategy designed to try to fill an estimated £43billion budget blackhole after the Government borrowed more than £270billion in the current financial year to prop up UK plc.

But amid the tax rises will also be a bumper stimulus package, as Mr Sunak looks to jump-start the UK's economy as lockdown is eased and coronavirus rules are lifted.

He is set to unveil £5billion in cash grants for businesses suffering from repeated lockdowns when he presents his March budget on Wednesday.

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