Following an early morning rally in anticipation of the budget announcement, the FTSE 100 was up by 0.58% to 6,651.22, as the close of day neared. It is the third consecutive day of upward movement on the index amid optimism surrounding the vaccine roll-out and Rishi Sunak’s budget.
Sunak announced a hike in corporation tax up to 25% from 2023, up from its present level at 19%. The lowest income tax threshold will rise to £12,570, while the higher rate threshold will go up to £50,270. Both will then be frozen until 2026. The Chancellor received mixed reviews, with experts warning of the potential impact of Sunak’s tax policies on the UK economy.
Nigel Green, chief executive and founder of deVere Group, gave his verdict as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.
“The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances,” said Green.
“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.”
“He is raising taxes under the radar. Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”
The FTSE 100, specifically homebuilders, benefitted from the Chancellor’s efforts to stimulate the economy.
FTSE 100 Top Movers
Homebuilders, Persimmon (5.52%) and Taylor Wimpey (5.23%), headed up the FTSE 100 closely followed by Barclays (4.63%).
At the other end of the index, Avast (-4.05%), Scottish Mortgage Investment Trust (-3.22%) and Severn Trent (-2.79%) were the day’s top fallers.
DS Smith (LON:SMDS) confirmed on Wednesday that its trading volumes are in line with the company’s expectations.
The FTSE 100 firm, which supplies packaging products to Amazon, Nestle and Unilever, noted “strong box volumes” driven by its differentiated offering, while input costs costs also increased.