By Rupert Steiner, Jack Denton, Callum Keown
The U.K. will introduce a new tax break for businesses that invest in the country, as it announced a hike in corporate tax rates to 25% of profits from 2023, in plans set out on Wednesday as part of an annual budget.
Finance minister Rishi Sunak pledged to use the “full measures of our fiscal firepower” to save jobs and businesses in the budget aimed at tackling the devastating impact of the COVID-19 pandemic on the economy.
The U.K.’s Office for Budget Responsibility (OBR), which advises the government, said it now expects the U.K. economy to return to pre-COVID levels in the middle of 2022 — six months earlier than its November forecast. The OBR forecasts the U.K. economy to grow 4% this year, before expanding 7.3% in 2022 — the highest annual gross domestic product growth since 1941.
However, Chancellor of the Exchequer Sunak warned the U.K. was at a “moment of crisis,” as he gave an update on the country’s finances and pledged billions more to support those most affected by the pandemic but also signaled some tax hikes to fix the finances.
Sunak announced plans to:
Hike corporate tax rates from 19% to 25% by 2023 for companies with profits over £250,000 ($349,000).
Extend the jobs furlough program that supports workers hit by the pandemic.
Introduce a new tax break for businesses that invest in the country in the next two years.
Extend the stamp duty holiday to Jun. 30.
Create a new infrastructure bank.
Bring £5 billion of additional grants to help pandemic-hit businesses.
Relax London listing rules.
“Taking into account the significant support announced at Spending Review 2020, this means our total COVID support package, this year and next, is £352 billion,” Sunak said, adding that measures announced last year took the total to £407 billion.
Forecasts show the government is expected to borrow £234 billion next year, but Sunak said “we cannot allow debt to keep rising,” setting out two initial measures to bring borrowing down.
Sunak announced plans to raise corporate taxes to 25% of profits in April 2023, up from the current rate of 19%. There would then be a taper for firms earning above £50,000 , with those earning more than £250,000 being taxed at the maximum 25%. Smaller companies earning less than £50,000 will be exempt from the increase and remain at the 19% rate.
The tax rise will affect any global company which makes profit in the country, including technology giants such as Facebook /zigman2/quotes/205064656/composite FB +3.26% and Google parent Alphabet /zigman2/quotes/202490156/composite GOOGL +1.00% , and the likes of coffee-shop chain Starbucks /zigman2/quotes/207508890/composite SBUX +1.72% and online retailer Amazon /zigman2/quotes/210331248/composite AMZN +1.11% .