Prime Minister Boris Johnson, has pledged to pause proposed cuts to corporation tax rates in the UK. In a bid to generate funds for public services, the Conservative leader revealed that the plans to reduce corporation tax from 19% to 17% in April 2020 had been shelved to help fund other “national priorities”.
Although the delay will disappoint some small business owners, the UK’s existing corporation tax rate is still the lowest in the G20, with only Singapore and Switzerland offering lower tax rates for companies worldwide.
Since 2013, UK corporation tax receipts have risen year-on-year to around £55bn in 2018. This tax take makes up around a tenth of the UK government’s total income.
Corporation tax receipts have grown by two-thirds in the last decade, since the decision to cut corporation tax rates from 28% to 19%, subsequently improving the economic landscape for ambitious business start-ups.
Johnson laid bare his plans to business leaders at the annual conference of the Confederation of British Industry (CBI). The CBI’s director, Carolyn Fairbarn said that the proposals may “work for the country” so long as it is underpinned by “further efforts to [reduce] the costs of doing business and promote growth”.
Conversely, Labour has revealed it would seek to increase corporation tax rates to 26% – a level last seen in 2011 – to yield billions more for the Exchequer to spend on the public sector.
The General Election manifestos of all the leading political parties are steadily being released over the coming days, including more tax pledges that will affect low-earners.
Johnson would seek to increase the National Insurance threshold to £12,500 over the coming years, with an initial increase from £8,628 to £9,500 in April 2020.
Meanwhile the Liberal Democrats confirmed in their manifesto that they would launch a root-and-branch review of the tax and National Insurance status of employees, contractors and freelancers to “ensure fair and comparable treatment” and “modernise rights to make them fit for the age of the gig economy”.
In addition, the Liberal Democrats would also seek to scrap capital gains tax allowances and put an extra penny on all income tax rates as part of their approach to solve public sector funding pressures.