Spring Budget: Corporation tax to rise to 25%
The measures come as the Office for Budget Responsibility’s (OBR) latest forecast predicts that the UK will not enter a technical recession this year
Corporation tax is set to rise from 19% to 25% for firms with profits over £250,000, as part of a number of measures announced in chancellor Jeremy Hunt’s Spring Budget.
To help offset the corporation tax rise, Hunt also announced a provision of £9bn of “full capital expensing” which for the next three years will see businesses able to deduct every single pound spent on IT equipment, plant or machinery from taxable profits.
Additional measures include an extension to the energy price guarantee and freezes on fuel and alcohol duty, with the chancellor claiming the latest budget aims to deliver “long-term, sustainable, healthy growth”.
For households, the chancellor revealed that the Energy Price Guarantee will remain at £2,500 until June. It had been expected to rise to £3,000 next month but the treasury confirmed it will now be capped. Prepayment metre charges will also be brought in line with comparable direct debit charges.
Fuel duty will also be frozen, with the 5p reduction announced last year remaining for another 12 months, saving the average driver £100-£200 pounds a year.
In addition, the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets and will also apply to pubs in Northern Ireland as a result of the Windsor Framework.
The small businesses investment allowance has been increased to £1m which Hunt said will mean 99% of smaller businesses can deduct the full value of all their investment from that year’s taxable profits.
Furthermore, small or medium-sized businesses will be able to claim a credit worth £27 for every £100 they spend if they spend 40% or more of their total expenditure on research and development.
As part of the budget no further changes were announced on VAT, income tax or National Insurance levels.
The measures come as the Office for Budget Responsibility’s (OBR) latest forecast predicts that the UK will not now enter a technical recession this year, while inflation is expected to fall from its current rate of 10.1% to 2.9% by the end of 2023.
Hunt added that the UK economy is “on the right track” with the UK economy forecast to grow 1.8% in 2024 but warned the government must remain “vigilant”.
