UK raises corporate tax to 25% as pandemic support hits £ 407 billion

UK Chancellor of the Exchequer Rishi Sunak attends a national “Clap for Carers” to thank the UK National Health Service (NHS) staff and frontline medical staff across the country on the steps against the Coronavirus pandemic fight by the Foreign and Commonwealth Office (FCO) on April 16, 2020 in London.

Tolga Akmen | WPA pool | Getty Images

LONDON – UK Treasury Secretary Rishi Sunak announced on Wednesday that UK corporation tax will rise to 25% in April 2023 as the government tries to restore public finances following the Covid-19 pandemic.

In its budget statement on Wednesday, Sunak said the changes would take effect after the Bureau of Budgetary Responsibility expects the economy to return to pre-Covid levels.

“Second, I protect small businesses with profits of £ 50,000 or less by creating a small win rate that is held at the current rate of 19%,” Sunak told the House of Commons.

“This means that around 70% of companies – 1.4 million companies – remain completely untouched.”

Above £ 50,000 a taper will be introduced so that only companies with a profit greater than £ 250,000 will be taxed at the full 25% tax rate.

The OBR now expects the UK economy to return to pre-Covid levels by mid-2022. GDP will grow by 4% in 2021 and 7.3% in 2022.

However, the government has set a peace record of £ 355 billion, 17% of GDP, since the pandemic broke out, and expects to raise another £ 234 billion (10.3% of GDP) next year. Borrowing will then drop to 4.5% of GDP in 2022/23 and to 3.5% in 2023/24. Underlying debt is projected to rise from 88.8% of GDP this year to 93.8% next year, peaking at 97.1% in 2023/24.

Covid’s answer is £ 407 billion

The budget will be provided as the nationwide Covid-19 restrictions will be gradually lifted in the coming months and will be completely removed on June 21. More than 20 million people in the UK have now received a first dose of vaccine.

The government embarked on unprecedented public spending as the 2020 economy saw its sharpest decline in more than 300 years. At Sunak’s last budget announcement in November, he unveiled the country’s largest peace budget ever recorded.

On Wednesday, Sunak announced further budget measures worth £ 65 billion for FY 2021/22, bringing the total government response since the pandemic started at £ 407 billion.

This included an extension of the country’s vacation program and a weekly increase in the Universal Loan, UK Social Security payment, by £ 20 per week, plus an additional £ 5 billion in grants to businesses to help reopen.

The coronavirus job retention program will continue to subsidize 80% of the wages of workers on leave through September. However, companies are being asked to contribute 10% in July and 20% in August when the economy reopens.

Sunak also extended the reduced rate of 5% (sales tax) through September 30, and further reduced business rates and stamp duty.

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