Budget 2021:Chancellor Rishi Sunak Inflation likely to rise further
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During his speech in the House of Commons, the Chancellor failed to mention that Council Tax rates are set to continue to rise throughout the economic forecast period. By the 2026-27 tax year, taxpayers are expected to generate an additional £12.1billion in Council Tax revenue. In context, this represents a 33 percent rise from the tax rate level reported in 2019/20, prior to the pandemic.
The move from the Government reflects a conscious effort to allow local councils to raise the adult social precept on taxpayer bills.
Any income raised from this tax charge is ring-fenced which means it can only be used for adult social care services.
Compared to March 2020, tax recipients have been higher over the past year by around £1billion due to local authorities being able to hike council tax rates.
This forecast is set to rise even further by 2024/25 to £2.2billion following the Budget’s proposal to give authorities the power to hike the adult social care precept.
In comparison to March 2021, Council Tax bill forecasts have been revised by £200million for the year due to lower than forecast unemployment figures.
This has led to a reduction in the eligibility of households for Council Tax support from their local authority.
Council Tax receipts are predicted to reach £1.3billion by the 2025/26 tax year, primarily due to the adult social care precepts which are part of the Budget.
This is yet another tax rise on the working age population by the Government, who are already facing a 1.25 percent hike on National Insurance payments.
On top of these various tax increases, the country is in the midst of a staggering increase in living costs, with food and energy bills rising.
Many financial experts predicted a Council Tax rise may be on the cards for the Government due to Mr Sunak failing to rule it out during his Conservative Party conference speech earlier this month.
On top of this, the Institute for Fiscal Studies (IFS) had previously issued a warning that a tax increase may be needed to address the demands of councils.
Kate Ogden, a Research Economist at the IFS, explained why such a tax increase may be deemed essential for many communities up and down the country.
Ms Ogden said: “The government has stepped up with billions in additional funding for councils to support them through the last 18 months.
“It is likely to have to find billions more for councils over the next couple of years if they are to avoid cutting back on services, even if they increase council tax by four percent a year or more.
“The coming financial year is likely to be especially tough, with the likelihood of at least some ongoing COVID-19-related pressures, and a particularly tight overall spending envelope pencilled in.
“At the same time, the Government urgently needs to urgently deal with a local government funding system which is becoming hopelessly out of date, being based on population levels and characteristics in 2013.
‘This results in manifest unfairness in the distribution of resources between councils.”
Households across the UK are set to be hit with a further Council Tax bill when the new fiscal year begins on April 6, 2021.
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