When will Corporation Tax increase to 25% and who will it impact
Prime minister Liz Truss sacked her Chancellor of 38 days Kwasi Kwarteng on Friday, installed Jeremey Hunt as the new Chancellor then went on to reverse a planned cut to business tax amid the ongoing fallout from the mini-budget.
It was announced by the then Chancellor Kwasi Kwarteng in his mini-budget on 23 September that the planned corporation tax increase from 19% to 25% from 1 April 2023 would be cancelled.
However, on 14 October, the prime minister announced that this cancellation would be reversed, meaning that the planned rise to corporation tax to 25% on 1 April 2023 would go ahead.
The move will raise around £18 billion a year and acting as a down payment on what will now be the UK government’s full Medium-Term Fiscal Plan.
In a statement, the UK Treasury said the legislated increase in the Corporation Tax rate from April 2023 will go ahead, with most small businesses benefitting from the new small profits rate.
It said: “The decision has been taken in recognition of the need to ensure the UK’s economic stability and reassure markets of its commitment to fiscal discipline, after elements of September’s Growth Plan went further and faster than markets were expecting.”
“The Prime Minister has set out that the government is prepared to do whatever is necessary to ensure debt is falling as a share of the economy in the medium term and to ensure that taxpayers’ money is well spent, putting public finances on a sustainable footing.”
The Treasury said: “The previously announced small profits rate of Corporation Tax will be maintained. Smaller or less profitable businesses will not pay the full 25% rate, and companies with less than £50,000 of profit – the large majority – will not see any increase at all, continuing to pay Corporation Tax at 19%.”
“The UK’s corporate tax regime will remain competitive and supportive of growth at the 25% rate, continuing to be the lowest rate in the G7. As part of the forthcoming tax review, the government will look at how the tax system can go further to promote growth and investment.”
“The government is committed to growing the economy and taking forward supply-side reforms that will ignite strong and sustained growth that delivers prosperity for the UK.”
“Chancellor of the Exchequer Jeremy Hunt will set out the government’s Medium-Term Fiscal Plan on 31 October, alongside a full forecast from the independent Office for Budget Responsibility.”
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