As previously legislated, the government announced today, Friday, 14 October, that Corporation Tax will increase to 25% in April 2023, raising approximately £18 billion annually and serving as a down payment on its full Medium-Term Fiscal Plan.
The Prime Minister has announced that the government’s strategy for achieving its mission of a low-tax, high-wage, high-growth economy will change.
The statutorily mandated increase in the Corporation Tax rate from April 2023 will be implemented, with the majority of small businesses benefiting from the new small profits rate.
On October 31, Chancellor Jeremy Hunt will present the Medium-Term Fiscal Plan, outlining measures to reduce debt as a percentage of GDP over the medium term.
The decision was made in recognition of the need to ensure the economic stability of the United Kingdom and reassure markets of the country’s commitment to fiscal discipline, after elements of September’s Growth Plan went further and faster than expected by markets.
The Prime Minister has stated that the government is willing to do whatever is necessary to ensure that debt as a proportion of the economy falls over the medium term and that taxpayers’ money is spent efficiently, thereby putting public finances on a sustainable footing.
The previously announced Corporation Tax rate for small profits will be maintained. Smaller or less profitable businesses will not pay the full 25% rate, and companies with less than £50,000 in profits — the vast majority — will continue to pay Corporation Tax at the current rate of 19%.
At 25%, the United Kingdom’s corporate tax regime will remain competitive and growth-friendly, continuing to be the lowest rate among the G7. As part of the upcoming tax review, the government will examine how the tax system can be improved to further stimulate economic growth and investment.
The government is committed to expanding the economy and advancing supply-side reforms that will spark robust and sustained growth and bring prosperity to the United Kingdom.
On October 31, Chancellor of the Exchequer Jeremy Hunt will present the government’s Medium-Term Fiscal Plan alongside a comprehensive forecast from the Office of Budget Responsibility.
Additional information
The approximately £18 billion raised annually by an increase in the Corporation Tax rate to 25% is an estimate. On October 31, the OBR will evaluate the fiscal impact of the change.
In the Medium-Term Fiscal Plan, the position of the Bank Surcharge will be confirmed by the Chancellor.