He pledged additional £65 billion to support Britons through to the end of lockdown and beyond, but said he would also need to start clawing back some of the £407 billion that has been spent in total during the pandemic.
Unprecedented levels of spending cannot continue, the chancellor warned, telling MPs he must be “honest” about how he plans to balance the books.
The starting point for paying income tax will increase to £12,570 in April but will stay at that level until April 2026, meaning more people will be dragged into paying tax as wages increase.
“The higher rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period,” the chancellor said, meaning more people will eventually be in the highest bracket.
Mr Sunak said people’s take home pay will not decrease because of the policy change, but said it does remove the incremental benefit created had thresholds continued to increase with inflation.”
In a bid to protect the poorest households, he said there would be no increase to income tax, national insurance or VAT.
Corporation tax will increase from 19% to 25% in 2023, Mr Sunak said.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.
“And, third, in today’s Budget we begin the work of building our future economy.”
As widely expected, the chancellor has extended thew furlough scheme, which pays 80% of out-of-work people’s wages, until September.
But the scheme will change from July, with employers being required to contribute 10% to workers’ pay packets, leaving the government to pay 70%.
Employers’ contribution will increase to 20% in August until the scheme ends on September 30.
Throughout the scheme employees should continue to receive at least 80% of their salary for hours not worked.