With Income Tax, NIC and VAT off the table, could Corporation Tax rise in the March Budget?
Chancellor Rishi Sunak is reportedly mulling an increase to the current 19% rate of corporation tax in the March Budget.
He seeks to close a widening deficit arising from the economic damage caused by the pandemic, and is reportedly closely monitoring the success of the vaccination programme as an indicator to the country's ability to bounce back.
Providing he keeps his promise, PM Boris Johnson ruled out any increases to Income Tax, National Insurance and VAT in his election manifesto, which reduces the Chancellors ability to raise cash. These taxes raise the largest share for the Treasury, so Sunak is left with fewer sources to generate substantial funds.
Supporters of a rate increase claim that an increase is fair, as only businesses who have remained profitable in this pandemic will pay more. However, there is great concern that any increase in business taxes at this precarious time could undermine recovery, and other argue for a return to a sliding scale rate, with small businesses paying a lower rate than larger corporations.
The UK's current rate of 19% is a historic low, and is also one of the lowest rates across the world. The rate was scheduled to be reduced to as low as 17% by April 2020 in George Osborne's Budget of 2020, but was not delivered. As recently as 2010, the main rate of the tax was 28%, which indicates the dramatic reduction over the last decade.
As the budget approaches, we will provide expert analysis and ensure our clients operate tax-efficiently.