London Daily

Focus on the big picture.
Monday, Aug 24, 2026

Rishi Sunak’s tax rises: three of the biggest examined

Rishi Sunak’s tax rises: three of the biggest examined

Analysis: Increases to income and corporation tax and higher NICs have contributed to the biggest UK tax burden since the 1950s

During his two years at the Treasury, Rishi Sunak’s tax policy has been characterised by large temporary cuts – to cushion the financial blow from the pandemic – followed by even larger and permanent rises running up to, and beyond, the next election in 2024.

The chancellor stressed that bringing down the annual deficit was a priority after he spent £400bn more than he had planned in 2020 keeping the economy afloat. With little room to cut welfare, as witnessed by this week’s £15bn of extra spending to cope with the cost of living crisis, he said the Treasury’s finances could only be shored up with higher taxes.


The Institute for Fiscal Studies (IFS), a tax and spending thinktank, said it was struck by how in little over a year Sunak had imposed tax rises of a similar scale to those seen during 10 years of Gordon Brown’s chancellorship, and that was before a planned £5bn windfall tax on oil and gas companies was included. The end result is the biggest overall UK tax burden since the 1950s. Here we examine three of the biggest rises:


National insurance


In September 2021, the government announced plans to introduce a health and social care levy of 1.25 percentage points that would be added to the national insurance contributions (NICs) of staff and employers.

In the teeth of angry protests from Tory backbenchers, Sunak pushed up the main rate for employees from 12% to 13.25%, while employers were told to pay 15.05% from April 2022.

Labour said it was the wrong time to raise taxes and was in stark contrast to the UK’s European neighbours, who were stimulating their economies with extra investment.


Dissent inside the cabinet forced Sunak to recalibrate the tax when he produced his March 2022 budget statement. He halved the £12bn he planned to raise by increasing the threshold at which workers start paying class 1 and 4 national insurance to £12,570. That adjustment will not take effect until 6 July this year, while the rise in NICs came into force at the start of April.

The Institute for Fiscal Studies (IFS) said: “Those earning less than around £35,000 will see a fall in their overall NICs bill in 2022-23 relative to 2021-22. Those earning more than this will see an increase in their overall NICs bill.”


Income tax

Increases in income tax, and especially the basic rate of 20%, are usually off-limits for any government. It means changes to the biggest generator of tax receipts are rare. Labour imposed a 50p in the £1 tax rate on those earning more than £150,000, which was largely seen as a “banker tax” in the wake of the financial crash.

George Osborne reduced the “additional” rate to 45p in 2013 and successive Conservative governments have campaigned to reduce income tax at the earliest opportunity.

So it proved hugely controversial when Sunak said in his 2021 spring budget that he would freeze personal tax thresholds, dragging more low-income households into paying the basic rate and those currently with earnings nearing £50,000 into paying the higher 40% rate. The freezes are forecast to last five years and raise around £13bn a year for the Treasury by 2025/26.


Corporation tax


Sunak became the first chancellor in 47 years to increase corporation tax when he told MPs last year that the headline rate would begin rising over five years to 25% from April 2023.

Currently at 19%, the increase perplexed Tory MPs told by successive chancellors that reductions to the main tax on corporate profits generated higher returns. Likewise, higher rates would, they were told, depress profits and therefore reduce tax receipts.


Sunak turned this argument on its head, saying the higher rate would generate £47.8bn in extra revenue by April 2026.

Adding to the confusion in Tory circles, the 25% top rate will be higher than the average headline rate of corporation tax in the EU, which was 22.2% in 2020, and the 21% headline rate in the US. It is also similar to the 26% advocated by the Labour party under its previous leader, Jeremy Corbyn.

The IFS said the corporation tax rise would ramp up the UK tax burden by an eventual 2% of GDP, equivalent to around an extra £46bn in government income in today’s money.

Newsletter

Related Articles

0:00
0:00
Close
Iranian Hackers Shut Down British Power Plant for Four Days in Landmark Cyber Attack
Novak Djokovic Reveals Relentless Self-Doubt and Rejects Retirement in New Documentary
Trump Imposes 50% Tariffs on Canadian Goods After Bilateral Trade Talks Collapse
Australia Combines Indigenous Fire Knowledge With Satellite Tech to Combat Catastrophic Wildfires
Father and Son Jailed in Scotland Over £900,000 Airport Cannabis Smuggling Operation
UK Fraud Reports Surge Sevenfold as Criminals Exploit QR Codes in Parking Meters and Phishing Emails
Brighton Thrash Aston Villa in Four-Goal Opening Half as Manchester City Trail Bournemouth
Erin Patterson Appeals Triple Murder Convictions After Hotel Mixed Sequestered Jury With Prosecution
Bank of England Maintains Close Watch on Banks Amid Global Economic Uncertainty
Warm Weather and Tourism Support UK High Street Spending During Summer
Westminster Faces Continuing Political and Administrative Fallout From Epstein Files Release
UK Invests in Domestic Defence Drone Manufacturing to Strengthen Military Supply Chains
Around Five Million UK Households Face Higher Mortgage Payments by 2028
Bluetongue Virus Cases Rise Across England, Wales and Scotland
UK Government Holds First National Day for Victims and Survivors of Terrorism
Historic Summer Droughts Threaten UK Harvests and Put Further Pressure on Food Prices
UK Economy Holds Up in Second Quarter Despite Global Energy and Geopolitical Pressures
UK Opens National Artificial Intelligence Safety Testing Facility
UK Government Finalizes Plans to Bring Remaining Regional Rail Services Into Public Ownership
Environment Agency Imposes Record Penalties on Water Companies Over Illegal Sewage Discharges
Great British Energy Announces Offshore Wind Partnership in North Sea
UK Government Tightens Planning Rules to Accelerate Housing Development
NHS Launches Digital Overhaul to Cut Elective Care Waiting Lists
Bank of England Signals Interest Rates May Stay Higher for Longer as Inflation Pressures Persist
The rise and fall of Hui Ka Yan, China’s richest man
Woke: Britain Considers Plain Packaging for Cigars as Specialist Shops Warn of Industry Collapse
Britain's Public-Service Productivity Remains Below 2019 as £80 Billion Output Gap Fuels WFH Debate
Mandelson Epstein Case in Jeopardy as U.S. Files Stay Out of Reach
Prince Harry and Six Others Ordered to Pay £9.5 Million After High Court Defeat
Bank of England Holds Interest Rate at 3.75% as Inflation and Energy Risks Persist
UK AI Security Tests Find Autonomous Agent Attempting Malicious Code Injection
UK Economy Grows 0.4% in Second Quarter Amid Global Pressures
UK Joins European Allies in Condemning Israeli Settlement Plans in West Bank E1 Area
Multiple People Killed in A66 Collision Near Middlesbrough Involving Police Vehicle
UK Government Holds First National Day for Victims and Survivors of Terrorism
UK Met Office Warns of Severe Autumn Storms as Strong El Niño Follows Historic Drought
Petrol Bombs Set Luxury Cars Alight Outside Birmingham Wedding as Police Hunt Three Men
Bitcoin Surges Toward $80,000 as Short Squeeze and ETF Inflows Ignite Crypto Rally
Prince Harry and Co-Claimants Ordered to Pay £9.5 Million Toward Daily Mail Publisher’s Legal Costs
Prince Harry and Meghan Markle Reportedly Plan Return to Britain With Their Children
UK Court Ruling Threatens Deportation Plans for Potential Trafficking Victims to Albania
Kemi Badenoch Presses UK Government for Decisions on Rosebank and Jackdaw Oil Fields
UK Foreign Affairs Committee Chair Calls for Ban on Goods from Occupied West Bank
Andy Burnham Government to Place Civil Servants Directly in English Mayoral Offices
Met Office Warns Major El Niño Could Bring Stormier, Wetter Autumn to UK
UK Economy Gains Unexpected Momentum Ahead of Andy Burnham Government’s First Budget
Twenty-Nine US States Take Meta to Trial Over Alleged Child Addiction on Instagram and Facebook
Former Scottish National Party Executive Peter Murrell Jailed for Five Years Over £400,000 Embezzlement
Moderna and Merck's Personalized Cancer Vaccine Succeeds in Historic Late-Stage Melanoma Trial
Prince Harry and Meghan to Move Back to Britain With Their Children
×