Tax  

What advisers can expect from Rishi Sunak as prime minister

As the leadership contest comes to a close, the likelihood that Rishi Sunak will be appointed the next prime minister is becoming slimmer by the day.

The triple lock means that the state pension is increased by the highest of earnings growth, price inflation or 2.5 per cent a year.

Last year there were concerns the measure would lead to the state pension rising by an artificially high amount because earnings growth was abnormally high due to the return of many workers from furlough after lockdown.

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Therefore this April the state pension only increased by 3.1 per cent, which was September’s CPI figure.

However, persistent high inflation and rising energy prices led to calls for the lock to be reinstated, leading to a potential 10 per cent rise in state pensions. 

Corporation tax

One of the reasons for Sunak’s resignation in July was repeated clashes with prime minister Boris Johnson over tax changes, and specifically Sunak’s refusal to cut corporation tax.

The 2016 Budget announced that corporation tax in 2020 would be reduced to 17 per cent, however it was later announced that the tax will be held at 19 per cent.

From 2023, the rate is due to be increased to 25 per cent.

Business leaders have hit out at the potential policy, saying it is a tax levied on profits at a time when many companies are facing recession.

But Sunak refused to back down, and instead focused on a cut on business investment, saying that “businesses simply aren’t investing enough”.

He was also said to be looking at reform of tax credits for research and development, and an improvement on the apprenticeship levy.

Social care levy

As another of Sunak’s legacies, it is unlikely the social care levy will change were he to become prime minister.

The levy is a 1.25 percentage point increase in national insurance, which began in April this year, aiming to raise £12bn annually to fund social care and reduce backlogs.

From next year, the levy is due to be split out as a separate tax, though Truss has confirmed her intentions to get rid of it entirely.

sally.hickey@ft.com