Small business will still benefit after corporate tax backflip

On Friday (14 October), the government reversed the corporation tax and announced it will now increase the tax to 25 per cent from April 2023 raising around £18 billion a year and acting as a down payment on its full Medium-Term Fiscal Plan.

Ms Truss said the legislated increase in the corporation tax rate from April 2023 will go ahead, with most small businesses benefiting from the new small profits rate.

She said the previously announced small profits rate of corporation tax will be maintained. Smaller or less profitable businesses will not pay the full 25 per cent 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 per cent.

Chancellor Jeremy Hunt will deliver the Medium-Term Fiscal Plan on 31 October, detailing action to get debt falling as a percentage of GDP over the medium term.

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.

Ms Truss said the UK’s corporate tax regime will remain competitive and supportive of growth at the 25 per cent 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.

Mr Hunt said he will set out the government’s Medium-Term Fiscal Plan on 31 October, alongside a full forecast from the independent Office for Budget Responsibility.