04 Mar 2021
Fears that a rise in Corporation Tax for businesses was on the cards was confirmed in yesterday's Budget.
But there was some small consolation in that the changes will not
come into effect until April, 2023.
The UK Government said the move is to balance the need to raise revenue with the objective of having an internationally-competitive tax system.
Chancellor Rishi Sunak said the rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7.
Firms with profits of £50,000 or less - around 70% of actively-trading companies - will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
The Corporation Tax increase is expected to raise £17billion a year.
Tony Danker, director general of the CBI, commented: “Moving Corporation Tax to 25% in one leap will cause a sharp intake of breath for many businesses and sends a worrying signal to those planning to invest in the UK.
"The Government must now have a laser-like focus on the UK's competitive position.
"The UK must remain attractive for every type of business, from the innovation, high-growth UK homegrown firm to the global firms investing in the UK. We look forward to working with the Government to achieve this."
But the Chancellor did have some positive news for businesses on a £25billion tax "super deduction".
The tax break for companies is aimed to spur investment in new equipment in what he called the "biggest business tax cut in modern history".
It will allow companies to deduct 130% of their investment from their taxable income, cutting their taxes by the equivalent of 25p in the pound.
The CBI's Mr Danker said the super deduction should be a real catalyst for firms to “green light” investment decisions.
He added: "The boldness of the Chancellor on this measure is to be admired."
In another move which has been welcomed by industry, Mr Sunak announced the formation of the first-ever UK infrastructure investment bank.
The enterprise will be based in Leeds, with a national remit.
The Chancellor added: "The bank will invest across the UK in public and private projects to finance the green industrial revolution.
"Beginning this spring, it will have an initial capitalisation of £12billion and we expect it to support at least £40billion of total investment in infrastructure."
Mr Sunak also used his Budget speech to highlight current projects in Scotland.
These include £27million being spent in the Aberdeen Energy Transition Zone and £5million in a global underwater hub in the city.
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