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UK corporation tax to rise to 25% on PM Truss’ U-turn

In a September 23 'mini-budget', Kwarteng had said corporation tax would be frozen at 19 per cent, scrapping a rise to 25 per cent planned by his predecessor, alongside a raft of other unfunded tax cuts which have since roiled financial markets

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People walk in Oxford Street, in London. British companies had not been vocal in their support of the corporation tax freeze. — AP

By Reuters

Published: Fri 14 Oct 2022, 7:48 PM

Last updated: Fri 14 Oct 2022, 8:41 PM

Britain’s corporation tax will rise to 25 per cent, said Prime Minister Liz Truss after she sacked finance minister Kwasi Kwarteng and U-turned on a programme of tax cuts on Friday.

In a September 23 “mini-budget”, Kwarteng had said corporation tax would be frozen at 19 per cent, scrapping a rise to 25 per cent planned by his predecessor, alongside a raft of other unfunded tax cuts which have since roiled financial markets.

Truss, speaking just hours after she fired Kwarteng, said she had decided to keep the rise, a move which would boost the public finances by 18 billion pounds ($20 billion).

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“We need to act now to reassure the markets of our fiscal discipline,” she told a news conference.

British companies had not been vocal in their support of the corporation tax freeze. Many say political and economic stability matters more to their ability to make decisions and do business than how much tax they pay.

Aimed at driving growth, the 45 billion pound ($50 billion) tax-cutting programme has unleashed battered the pound, forcing the Bank of England to intervene to stabilise markets, and caused political backlash, which has now cost Kwarteng his job.

Kitty Ussher, chief economist at the Institute of Directors, said that the corporation tax freeze was not something the organisation had requested.

“It wasn’t on the list at all,” Ussher said.

She said that recent political upheaval plus the surge in inflation was weighing on the investment plans of the mid-sized firms that make up the bulk of the IoD’s membership.

Kwarteng’s cut to the highest rate of income tax, another part of his mini-budget, had already been reversed earlier in October.

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Reuters

Published: Fri 14 Oct 2022, 7:48 PM

Last updated: Fri 14 Oct 2022, 8:41 PM

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