Battling back from Covid-19 is going to be a long hard journey. As the UK Government eases lockdown restrictions and state support for the economy is slowly scaled back, debate will inevitably pivot towards how the near £300billion black hole in public finances should be filled.
While the Coalition Government opted for public spending cuts to tackle the deficit after the 2008 financial crash, Prime Minister Boris Johnson is reportedly reluctant to follow a similar path. If this is the case then tax rises will likely be necessary to help balance the books – and Brits appear ready to do their bit.
Over three-quarters of UK workers say they would accept paying more income tax in order to fund the Covid-19 effort. On average, workers are willing to pay almost 4% more than they do at the moment.
While policymakers will need to be careful not to stifle an economic recovery by hiking income tax rates too much, there appears to be general acceptance that the Covid-19 costs will need to be repaid and that tax rises are therefore a necessary evil.
Given battling this pandemic has required a collective effort, it would make sense for all of us to help foot the bill. Indeed, this may be one of the few times in history where a Government could hike income tax – perhaps via a time-limited Covid-19 surcharge – without necessarily wrecking their election chances. Interestingly, it seems that most people (85%) would rather pay lower amounts over a longer period of time, rather than higher amounts over a short timeframe.
Few support pension tax relief cuts
Although most people accept the Treasury will need to raise funds via the tax system to pay for Covid-19, there is significant disparity in the appeal of various different measures.
Increases in dividend and capital gains tax were the most likely to be deemed acceptable by respondents, followed closely by rises in income tax. Just over a fifth (22%) believe inheritance tax should be in the Chancellor’s crosshairs, while 21% backed a National Insurance increase.
However, when it comes to pensions the public is sending a clear ‘hands off’ message to the Chancellor. Only 1-in-10 say they would accept scrapping the state pension triple-lock as part of the pandemic response, while just 9% opted for scrapping pension tax relief.
Source: Research conducted by AJ Bell and Opinium between 22/05/20 – 26/05/20 with 2,001 respondents
These articles are for information purposes only and are not a personal recommendation or advice.
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