UK corporation tax to rise to 25% as Sunak extends Covid support package – Reuters

Britain’s Chancellor of the Exchequer has extended most coronavirus support for businesses and individuals until September, but has announced future tax increases to mitigate the impact on public finances. The corporate tax rate will rise from 19% to 25% from 2023, so Northern Ireland’s rate will be double that of 12.5% ​​south of the border.

Presenting the budget in the House of Commons, Rishi Sunak said the rapid deployment of the coronavirus vaccine in Britain would help the economy return to its pre-pandemic size by the middle of next year, six months ahead of schedule. But although the economy is expected to grow 4% this year and 7.3% in 2022, growth is expected to slow to 1.7% in 2023, 1.6% in 2024 and 1.7% in 2025.

“Firstly, we will continue to do whatever it takes to support the people and businesses of Britain during this time of crisis,” Mr Sunak said.

“Secondly, once we are on the road to recovery, we will have to start fixing public finances – and I want to be honest today about our plans to do so. And third, in today’s budget, we are beginning to build our future economy.

The furlough scheme, which was due to end next month, will be extended until September, although employers will have to pay an increasing share of the costs from July. An emergency £20 (€23) per week increase in social benefits will also continue into the autumn, as will a 5% VAT rate on hospitality.

Businesses that reopen after lockdown will be eligible for one-off ‘restart grants’ of up to £18,000 and can apply for loans ranging from £25,000 to £10m, with the government offering lenders and an 80% guarantee. The government will also guarantee 95% mortgages for first-time buyers in what Mr Sunak said was a bid to help those who could not afford a higher deposit.

Highest borrowings

Britain will borrow £355bn this year, or 17% of its national income, the highest level of borrowing since World War II. The borrowing forecast for next year is £234bn, or 10% of GDP. Underlying debt is expected to rise from 88.8% of GDP this year to 93.8% next year and 97% in 2023, remaining at that level for the next three years.

“The amount we borrowed is only comparable to the amount we borrowed during the two world wars. It will be the job of many governments, for many decades, to repay it. Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to let our future borrowing and debt grow unchecked,” Sunak said.

“When crises hit, we need to be able to act, and we need the fiscal freedom to act – a freedom you only have if you start with public finances in a good and strong position. The only reason we were able to react as boldly as we did to Covid is because 10 years of Conservative governments painstakingly rebuilt our fiscal resilience.

Income tax thresholds will be frozen until 2026, when inflation is expected to mean a million more people will be in a higher tax bracket and 1.3 million people currently not subject to income tax will pay the base rate. Inheritance tax, pension relief, capital gains tax and VAT registration thresholds will also be frozen.

Only companies with profits over £250,000 a year will pay the full 25% corporation tax rate. Those with profits below £50,000 – around 70% of businesses – will continue to pay 19% and the rate will be reduced for those earning between £50,000 and £250,000.

‘Super-deduction’

In a bid to boost Britain’s low productivity by boosting business investment, a new ‘super deduction’ will allow companies to deduct 130% of investment in their business from their tax bill.

Business groups have broadly welcomed the budget, with the Confederation of British Industry (CBI) saying it is “strongly successful in protecting the economy now and kick-starting the recovery”. But Labor leader Keir Starmer said he was ‘hiding the cracks, rather than rebuilding the foundations’ of an economy weakened by 10 years of Tory rule.