THE furlough scheme will be extended until the end of September, as will the 5% reduced rate of VAT for tourism and hospitality firms, and the temporary £20-a-week rise in Universal Credit payments will continue for another six months.

Rishi Sunak announced the measures in his Budget yesterday – part of a £65 billion lifeline for the economy as it emerges from the pandemic, but the SNP described his measures as a “return to austerity”.

Sunak said the economic damage caused by the coronavirus crisis will have to be repaired, and his plans will see the tax burden rise to its highest level for more than 50 years. Taxes on business profits will be hiked from 2023, while income tax thresholds will be frozen – meaning more people will be dragged into paying.

According to the Office for Budget Responsibility (OBR), raising the headline corporation tax rate, freezing personal tax allowances and thresholds, and taking around £4bn a year more off annual departmental spending plans would raise a total of £31.8bn in 2025-26. The Budget measures will raise the tax burden from 34% to 35% of gross domestic product (GDP) in 2025-26, “its highest level since Roy Jenkins was chancellor in the late 1960s”.

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Sunak said the total package of measures to support the economy amounted to £407bn, but he warned the unprecedented spending could not continue and he had to be “honest” about putting the country’s finances back on a sustainable footing.

The point at which people begin paying income tax will increase by £70 to £12,570 in April, and will stay at that level until April 2026, meaning more people will pay tax as wages rise.

The 40p rate threshold will increase by £270 to £50,270 and then be frozen.

Sunak explained that “nobody’s take-home pay will be less than it is now” but he acknowledged it “does remove the incremental benefit created had thresholds continued to increase with inflation”.

Corporation tax will rise from 19% to 25% in 2023, but a new “small profits rate” will maintain the 19% rate for firms with profits of £50,000 and there will be a taper above that so only businesses with profits of £250,000 or more will be taxed at the full 25% rate.

SNP Westminster Leader Ian Blackford said the Budget marked a “return to austerity” and fails to tackle inequality.

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In a statement, Blackford said: “The Tories are threatening Scotland’s recovery with a return to austerity cuts, an extreme Brexit, and a Budget that completely failed to deliver the meaningful change and investment needed to build a fairer society.

“The UK has suffered the worst economic slump of any major economy, UK unemployment is rising, and millions of families have seen their incomes slashed – but the Chancellor has added to this misery by imposing a public sector pay freeze, cliff-edge cuts to Universal Credit, and tax rises for millions of workers.”

Finance Secretary Kate Forbes welcomed some of Sunak’s measures, but added: “Over the coming days I will be meeting with all parties in Parliament as we look towards the final stages of the Scottish Budget next week and I repeat my call to them to come together in a time of crisis to pass a budget that delivers for Scotland.”