Corporation Tax Will Rise to 25%

The UK government has announced that Corporation Tax will increase to 25% from April 2023, raising approximately £18 billion per year. This decision is part of the government’s plan to achieve a low tax, high wage, high growth economy. Smaller businesses, however, will benefit from a new small profits rate and will not be subject to the full 25% rate. The government aims to ensure economic stability and reassure markets of its commitment to fiscal discipline.

The increase in Corporation Tax has been legislated for and will go ahead as planned. The Prime Minister believes that this change is necessary to achieve the government’s mission of a low tax, high wage, high growth economy. Chancellor Jeremy Hunt will provide more details in the Medium-Term Fiscal Plan to be released on 31st October. This plan will outline the actions the government will take to decrease debt as a percentage of GDP in the medium term.

The government recognizes the importance of economic stability and wants to ensure that taxpayers’ money is spent wisely. Therefore, steps are being taken to put the country’s public finances on a sustainable footing. The previously announced small profits rate of Corporation Tax will still be in place, benefiting smaller or less profitable businesses. Companies with profits below £50,000, which make up the majority, will not experience any increase in Corporation Tax and will continue to pay at the current rate of 19%.

Despite the increase in Corporation Tax, the UK’s corporate tax regime will remain competitive and supportive of growth. Even at 25%, it will still be the lowest rate among the G7 countries. As part of an upcoming tax review, the government will consider how the tax system can further promote growth and investment.

The government is committed to fostering economic growth and implementing supply-side reforms that will lead to sustained and strong growth, ultimately benefiting the UK as a whole. Chancellor Jeremy Hunt will provide further details on the government’s plans and a full forecast from the independent Office for Budget Responsibility on 31st October.

In summary, the UK government has announced an increase in Corporation Tax to 25% from April 2023, with the aim of raising £18 billion per year. However, smaller businesses will benefit from a new small profits rate and will not experience an increase in their tax rate. The government’s decision is driven by the goal of achieving a low tax, high wage, high growth economy while ensuring economic stability and fiscal discipline. The government remains committed to supporting growth and investment through a competitive corporate tax regime. Further details regarding the government’s plans and fiscal forecast will be provided in the upcoming Medium-Term Fiscal Plan.