London Daily

Focus on the big picture.
Tuesday, Mar 31, 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
King Charles Plans US State Visit as UK Strengthens Ties with Trump Leadership
UK Regulator Launches Investigation Into Microsoft’s Business Software Practices
Kanye West Set for High-Profile Return to UK Stage at Wireless Festival
Trump Presses Europe to Strengthen Commitment as Iran Conflict Escalates
UK to Deploy Additional Troops to Middle East Amid Rising Regional Tensions
UK Authorities Face Claims of Heavy-Handed Measures in Monitoring Released Pro-Palestine Activists
Trump Calls on UK to Secure Its Own Energy as Iran Conflict Intensifies
Nigel Farage Declines Invitation to UK Conservative Conference Led by Liz Truss
Trump Warns Allies to Take Responsibility as Rift Deepens with UK and France Over Iran Conflict
How Britain’s Prime Minister Controls U.S. Bomber Access in Escalating Iran Conflict
Trump Urges Allies to Secure Their Own Oil Supplies as Hormuz Crisis Disrupts Global Energy
Russia Expels British Diplomat as UK Pushes Back Against Pressure
White House App Faces Scrutiny After Claims of Continuous User Location Tracking
BBC Faces Scrutiny Over Allegations of Paid Content Linked to Saudi Arabia
UK-France Coastal Patrol Agreement Nears Breakdown Amid Migration Pressures
UK Police Detain Pro-Palestine Activist Again Weeks After Bail Release
FTSE 100 Advances as Energy and Mining Shares Gain Amid Middle East Tensions
Eli Lilly Seeks UK Pricing Deal to Unlock Renewed Pharmaceutical Investment
Three Arrested in UK After Massive Cocaine Haul Discovered Hidden in Banana Shipment
UK Fuel Prices Poised for Further Surge Amid Global Energy Pressures
Apple Subsidiary Penalized by UK Authorities for Breach of Moscow Sanctions
Western Allies Intensify Coordinated Sanctions Strategy Against Russia
UK Lawmakers Face Criticism Over Renewed Push for Social Media Restrictions
Starmer Signals UK Crackdown on Addictive Social Media Features
Rising Costs Push One in Five UK Hospitality Businesses to the Brink of Closure
Man Arrested on Suspicion of Attempted Murder After Car Strikes Pedestrians in UK, Injuring Seven
Escalating Conflict Involving Iran Tightens Fiscal Pressures and Highlights UK Economic Vulnerabilities
UK Moves to Confront Russian ‘Shadow Fleet’ Operating in Its Waters
UK Housing Divide Deepens as Older Owners Hold Wealth While Under-30s Face Mounting Barriers
London Demonstration Calls on UK to Recognize Iranian Opposition’s Provisional Government
UK Green Party Vote on ‘Zionism is Racism’ Motion Collapses Amid Internal Disputes and Technical Failures
SNL UK Ignites Debate with Sharp Royal Satire Targeting Prince Andrew and Prince William
EU Proposes ‘Emergency Brake’ to Resolve Deadlock in UK Youth Mobility Talks
Thousands Rally in London to Oppose Rise of Far-Right Movements
Hong Kong Official Rejects Allegations of Surveillance Orders Targeting UK-Based Dissidents
PayPal Expands Cryptocurrency Services to Allow UK Users to Buy and Sell Bitcoin
UK Minister Challenges Reform Party’s ‘Pro-Family’ Agenda as Debate Intensifies
Concerns Grow Over Meningitis Risk Among UK Students Amid Warning Signs of New Outbreaks
Japanese Grand Prix 2026: Schedule, UK Start Times and Full Broadcast Details
Electric Vehicles Seen as Strategic Solution to UK Fuel Reserve Concerns
Rise of Lone-Actor Threats and Online Radicalisation Drives New Wave of Antisemitic Attacks in the UK
Canada Advances Plan to Ban Cryptocurrency Donations in Election Campaigns
UK Faces Looming Medicine Shortages as Iran Conflict Threatens Supply Chains
Deadly Meningitis Outbreak in the U.K. Highlights Urgent Need for Vaccination
Fresh Claims Emerge Over Harry and Meghan’s Australia Visit as Insider Speaks Out
NATO Assessment Indicates UK Defence Spending Has Fallen Below Alliance Average
FTSE 100 Slips as Middle East Tensions Weigh on Investor Sentiment
UK Economy Begins to Feel Early Impact of Iran Conflict as Policy Challenges Intensify
Russian National Jailed in UK After Assault Case Linked to Barron Trump’s Alert
Energy Price Surge Accelerates Shift Away from Fossil Fuels in UK Homes
×