The first phase of the plan includes a long list of policy expansions with an additional spending of £ 53.5 billion, or 2.6% of GDP. This includes extending payment plans for employees in the IDF until the end of September, extending the deadline for reducing VAT in the hospitality industry until March 2022, reducing stamp duty (purchase tax) and more. The new move also includes a new 130% “super-deduction” for business investment (increased tax credit against real investments that businesses will make).
“The second phase of the plan includes two rather large tax increases: the freezing of income tax brackets – non-raising of tax thresholds – from April 2022; and an increase in the corporate tax rate from 19% now to 25% from April 2023.
The net impact of the new policy measures is expected to be equivalent to £ 19 billion in favor of the British Treasury in 2023/24, £ 32 billion in 2024/25 and £ 36 billion in 2025/26.
“This is a very large move of raising taxes in the future and following these expected moves, estimates of the UK Government’s financing needs in the more distant future, of 2024/2025, have been reduced. As a result, the debt-to-GDP ratio will rise more moderately than previously observed. , As a percentage of GDP, will still remain relatively high.
It seems that this recent assessment of the situation has already been reflected in a slight decline in the yields on the redemption of British government bonds, in contrast to the upward trend in yields in other countries, especially in the US and the eurozone.