Chancellor George Osborne has reduced the rate of corporation tax from 22 per cent to 21 per cent with effect from April 2014, the second cut this year.
In today’s (5 December) Autumn Statement, Mr Osborne said the new rate will be the “lowest rate” of any major western economy. He claimed that America’s rate is 40 per cent, France’s rate is 33 per cent and in Germany it is 29 per cent.
Mr Osborne said: “I have already cut the main rate of corporation tax from 28 per cent to 24 per cent and it is set to fall further to 22 per cent.
“This has helped British companies and frankly left other countries scrambling to keep up. They will have to try harder. For I am today cutting the main corporation tax rate again by a further 1 per cent.”
In relation to personal tax rates, Mr Osborne said the threshold for paying the top-tier level of income tax will rise from the current rate of £41,450 to £41,865 in 2014, followed by a further 1 per cent increase in 2015 to £42,285.
He said this below-inflation rise would raise an additional £1bn in tax revenue, adding that it is the “first cash increase in the higher rate threshold in this Parliament”
In an attempt to offset claims that the statement would be punitive for lower-income families, Mr Osborne said the minimum threshold for income tax was also going to rise to £9,440, meaning the government is “within touching distance” of the £10,000 personal allowance limit targeted by the Liberal Democrats.
He said: “There are no easy ways to reduce the deficit – but from year to year, no one will pay a penny more in income tax.”
In addition, capital gains tax annual exempt amount will be increased by 1 per cent over the same period, reaching £11,1000, and inheritance tax nil-band rate, which has been frozen since 2009 at £325,000 will be increased by 1 per cent in 2015-16 to £329,000.