Today the Chancellor of the Exchequer, Rishi Sunak, delivered his Budget and set out the Government’s plans to support businesses and create jobs.
It had been widely anticipated that the Chancellor would announce increases in the rates of capital gains tax and corporation tax, as part of a package of measures needed to repair the profound damage to public finances caused by the pandemic.
It came as no surprise, therefore, that it was announced that, from April 2023, the rate of corporation tax will increase from 19% to 25%, on profits over £250,000. The Chancellor emphasised his view that the UK will remain internationally competitive and attractive to inward investment, as a rate of 25% will still be the lowest rate of corporation tax in the G7. The rate payable by companies whose profits are £50,000 or less will remain at 19%, and the rate will be tapered for companies with profits over £50,000, demonstrating that the Government is keen to support smaller businesses.
The Chancellor highlighted that he is giving advance notice of the rate change, as businesses need certainty. This is a possible indication of how he may approach other tax changes in the future and, certainly, two years’ advance notice of any tax changes would be welcome!
In terms of immediate actions, the Government has extended the timeframe for certain measures it had already introduced. These include:
It will have come as a relief to many that there were no significant changes to personal taxation in the Chancellor’s announcements. Most notably, there was no change to capital gains tax rates, as had been widely speculated would happen, and these rates remain historically low. There was also no mention of a wealth tax or changes to the inheritance tax regime generally.
There were a number of effective tax increases:
On 23 March 2021, the Government will publish its “Tax Policies and Consultations” paper. The government has given no real indication as to the substance of the paper, but it may use this as an opportunity to push forward with a number of ongoing tax consultations and reviews including:
It is worth noting that the Government has stated that none of these announcements will require legislation in the Finance Bill 2021 or have an impact on the Government’s finances so we are unlikely to see any tax increases (or decreases) on this date. We will study the paper with interest and provide our thoughts on the implications for clients in due course.
Should you have any questions relating to the measures announced today, do not hesitate to get in touch with a member of our private client team.