Corporation Tax rise axed as Chancellor aims for growth
Chancellor Kwasi Kwarteng’s mini-Budget has scrapped a planned rise in Corporation Tax as part of a wide-ranging raft of tax-cutting measures announced last week.
The Government says the move to scrap the rise will save £18.7 billion per year by 2026 as it targets a 2.5 per cent rate of growth.
The Chancellor has now cancelled the planned increase and rather than rising to 25 per cent from April 2023, the rate will remain at 19 per cent for all firms, regardless of the amount of profit made.
Rate the same for all businesses
Previously, the Government plan was for the rate of Corporation Tax to increase from 19 per cent to 25 per cent from April 2023 for firms making more than £250,000 profit. That figure accounts for around 10 per cent of actively trading companies.
The rate was set to rise incrementally for businesses making between £50,000 and £250,000 and would vary between 19 per cent to 25 per cent, depending on how much profit a firm was making.
The figure of 19 per cent was set to remain for 70 per cent of businesses that make profits of £50,000 or less.
Savings ‘will be used to reinvest’
The Chancellor said in his speech to the House of Commons that savings would be used by businesses to reinvest, create jobs, raise wages, or pay the dividends that support pensions.
Since 2010, successive cuts were made to the main rate of Corporation Tax reducing it from 28 per cent in 2010 to 19 per cent in April 2017.
The UK rate of 19 per cent is still significantly lower than other G7 countries according to figures from the Organisation for Economic Co-operation and Development (OECD).
Those figures are in the mid to late 20s per cent, with only Russia and Saudi Arabia on 20 per cent.