From April 2023 the rate of corporation tax paid on company profits will increase from 19 per cent to 25 per cent, the Chancellor has announced today.
Speaking at the Budget, Rishi Sunak outlined the corporation tax increase saying it was “fair and necessary” for businesses to contribute to the UK’s recovery due to how much support they received throughout the pandemic.
However, companies with profits under £50,000 will remain at 19 per cent, meaning only 10 per cent of companies will pay the higher rate.
At the same time, Sunak also unveiled a 'super deduction' tax relief for businesses in a bid to spur investment. Companies that invest in their businesses over the next two years will be able to reduce their tax bills by 130 per cent of the cost - a move the chancellor described as "the biggest business tax cut in modern British history".
However, Budget documents said the deduction will only apply to "companies investing in qualifying new plant and machinery assets" rather than intangible assets.
Paul Fazackerley, IFA at Furnley House, said: "While not everyone will support raising the rate of corporation tax, the reality is that it's the right thing to do.
"Corporation tax is a tax on profits, not turnover, so it is only a tax on businesses that are thriving. Businesses have had a lot of support over the last year and there have been more winners than perhaps some people realise.”
Sunak noted the UK will continue to have one of the lowest corporation tax rates even after the rise comes into force.
Fazackerley added: “The worst thing we could have had was more changes to pensions or savings legislation, particularly with so many people having to adjust their retirement plans due to the pandemic.
“So a tax that puts more burden on successful businesses without impacting ordinary savers or retirees makes a lot of sense."
amy.austin@ft.com
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