£18bn corporate tax hike could cripple struggling businesses, Azets warns

By 2025/26, the UK’s business community will have to pay an additional £18bn in corporate taxes a year, which will “significantly reduce investment and increase the chance of enterprises shutting”, according to a new report from accountancy firm, Azets.

The report also saw a 31.58% proportionate increase in the Corporation Tax rate due to take effect in April.

Corporation Tax, which is currently 19%, will rise to 25% on 1 April 2023 and will raise an estimated additional £12bn in the first year, rising to £18bn by 2025/26. 

The report highlighted that UK businesses currently contribute around £68bn in Corporation Tax per annum, equating to 2.9% of UK GDP.

Despite soaring prices and the challenging economic climate, the Government announced last October that it would persevere with the baseline increase on profits of more than £250,000.

According to the report, some businesses may not yet be fully aware of the implications the corporate tax might have. Azets added there is concern that the scale of the tax increase along with rising interest rates and inflationary pressures will restrict inward investment opportunities and in turn growth.

The accountancy firm claimed that the tax burden on business has become higher than it has seen in the last two decades across the board, from National Insurance Contributions (NICs) to Corporation Tax.

However, it said its “greatest worry” is the impact on owner managed businesses who can’t invest in growing their business as they need the profits to pay the household bills.

The company suggested that with an increase on this scale “it is more important than ever” that UK SMEs actively manage their Corporation Tax liabilities.