Philip Hammond will have to come up with extra funds for Theresa May’s £20bn pledge

British taxpayers will soon learn how the government plans to finance Theresa May’s pledge to increase spending on the NHS by £20bn by 2023.

After months of intense speculation, Philip Hammond, the chancellor, will on Monday announce the tax and spending changes required to accommodate the extra funds in his budget.

With no clarity over the type of Brexit deal Britain might achieve with Brussels, the chancellor’s room for manoeuvre is limited. However, there are a number of tweaks he could make to generate more income to pay for the NHS spending increase.

More borrowing

The easiest way for Hammond to find the additional funds for the NHS would be to ditch the Conservatives’ self-imposed fiscal mandate to generate a budget surplus by the mid-2020s.

The public finances have performed better than expected so far this year, with the budget deficit – the gap between tax revenues and government spending – running at about £10bn lower than a year ago.

Economists believe the chancellor has enough fiscal headroom to maintain a budget deficit of 2% of GDP by 2021 and increase spending by about £30bn, should the UK leave the EU with the softestpossible Brexit deal, which would be more than enough to cover the pledge.

Income tax

Facebook Twitter Pinterest The public finances have performed better than expected with the budget deficit about £10bn lower than a year ago. Photograph: Jim Dyson/Getty Images

Hammond could scrap two manifesto commitments: ditching an increase in the tax-free personal allowance to £12,500 (currently £11,850) and raising the higher rate income tax threshold to £50,000 (currently £46,351) by 2020.

The Resolution Foundation thinktank reckons this could raise about £2.5bn. However, there have already been suggestions that this money could go towards funding a £2bn reversal of cuts to universal credit.

Labour has argued for an increase in personal tax on the top 5% of earners, but the Conservatives are highly unlikely to adopt such an approach. The Institute for Fiscal Studies (IFS) thinktank also argues that Labour’s proposals would only raise about £2.5bn. It says double that amount could be found from adding one percentage point to all income taxes, national insurance contributions and the main rate of VAT.

Corporation tax

Hammond could choose not to cut the rate of corporation tax from its current 19% to 17% in April 2020. TheIFS estimates £5bn could be saved in this way.

He could also make changes to the rules around how much VAT small companies must pay. Economists at Barclays reckon that together both of these changes could generate£8-10bn per year, which would hand the Treasury about £40-50bn over five years.

Hammond is constrained by the fact that his corporation tax cut was in the Tory manifesto, but he could frame the freezing of corporation tax as a temporary measure until there is greater clarity after Brexit.

Entrepreneurs’ relief

Greater restrictions of entrepreneurs’ relief, or even its total abolition, could be an option. The scheme – designed to encourage people to start a company – has been branded as the “worst tax break” in Britain by the Resolution Foundation, which reckons that axing it would generate annual savings of around £2.7bn.

Removing the tax could backfire though – the chancellor could be branded an anti-business politician when Conservatives see themselves as the party of entrepreneurs.

Self-employment

Facebook Twitter Pinterest The government believes that some people use so-called personal service companies to avoid paying tax. Photograph: PA

There have been rumours that the chancellor could overhaul the tax rules for self-employed workers. One such measure would be personal service companies in a rule known as IR35.

The government believes that some people use so-called personal service companies to avoid paying tax they would be liable for if they were directly employed. Tax experts estimate as much as £1.2bn could be lost by 2023 without reform. However, the chancellor would probably again run into opposition from his own benches.

Property taxes

Council tax, although widely regarded as one of the most out-of-date and regressive taxes in the country, is unlikely to be changed given the complexity entailed. But property taxes could feature, after the prime minister pledged to consult on an additional 1-3% stamp duty on overseas buyers of residential property.

There have been calls for wealth taxes on property, or reforming stamp duty and replacing it with a land development tax. But economists say that it is unlikely at this budget.

Fuel duty escalator

Facebook Twitter Pinterest The chancellor could choose to end the freeze on fuel duty levied at the petrol pump. Photograph: Lewis Whyld/PA

There were early suggestions that motorists could have been hit with higher taxes to pay for the increase in NHS spending. Fuel duty levied at the petrol pump has been frozen for eight years in a row, rather than increased in line with inflation.

Allowing the tax to rise in line with inflation could have generated as much as £800m extra for Treasury coffers next year – and billions more over subsequent years.

But the prime minister reckons it is too unpopular among voters.

Fixed-odds betting terminals/gambling

A cut in the maximum wagers on fixed-odds betting terminals (FOBTs) from £100 to £2 is unlikely to take effect until October 2019, which means the government will continue to rake in tax from the machines. It currently makes about £450m a year from gambling taxes.

Analysts expect that the government will increase the rate on remote gambling on internet websites, offering games such as poker and roulette, with the current rate of tax needing to rise by about 5% from 15% to offset the loss in revenue from FOBTs.

Plastic and privatisation

Facebook Twitter Pinterest Philip Hammond could raise extra revenue by doubling the levy on plastic carrier bags from 5p to 10p. Photograph: Gill Allen/REX Shutterstock

The government could flex its green credentials by increasing the plastic bag levy to 10p from 5p.

The chancellor could also raise cash from privatisations, such as selling more shares in Royal Bank of Scotland, which is still 62% taxpayer owned.

The government is expected to sell about £3bn each financial year, helping to bring in additional revenue that could be used to help pay for the NHS.

What about a special digital tax?

Hammond announced at the Conservative party conference earlier this month that the UK might push ahead with a “digital services tax” if there was no rapid international agreement about how to more effectively tax internet companies. The details could be unveiled on Monday.

The idea is to make companies like Amazon, Facebook and Google pay more tax. They can currently, quite legally, book their profits in low-tax locations like Ireland and Luxembourg. But the idea is not without controversy.

The European commission backs a 3% tax on digital sales and services and this week the French finance minister, , said EU countries should agree a joint approach by the end of this year.

However, a letter sent by industry group Tech UK this week warned that companies could cut their investment in the UK if the government pressed ahead with a tax on sales rather than profits.

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There are also concerns that the US government could retaliate if Donald Trump regarded any action as an attack on US business. On Friday the US Treasury secretary, Steven Mnuchin, said singling out internet companies would “unfairly” penalise them.

Several big store chains have called for a tax on online retailers – because high street stores pay much higher business rates – but they are not unanimous: Tesco and Debenhams are in favour, while John Lewis and Next are against. Carolyn Fairbairn, the CBI director general, has warned such moves could “backfire”.