Truss makes U-turn on cancelling 25 percent rise in corporation tax
Liz Truss has reversed her initial plan to cut corporation tax by 25 percent, a move she said would save 18 billion pounds a year on the ill-received mini-budget.
Revealed during a Downing Street press conference, the decision comes after weeks of pressure following a fiscal statement by chancellor Kwasi Kwarteng, who Truss revealed had been fired and thus replaced with Jeremy Hunt.
Speaking to the press, Truss said that parts of the mini-budget “went further and faster than markets were expecting”.
“So the way we are delivering our mission right now has to change. We need to act now to reassure the markets of our fiscal discipline,” she continued, adding that she would not go ahead with cancelling the scheduled rise in corporation tax, a plan that was first introduced by former chancellor Rishi Sunak.
At the time, Sunak had said the move would help the government balance the books following significant spending during the pandemic.
The legislated increase in corporation tax rate will now go ahead from April 2023, with the government stating in a release that most small businesses will benefit from the new small profits rate.
Smaller businesses will not be required to pay the full 25 percent rate, and a large majority of companies with less than 50,000 pounds of profit will not see any increase at all, continuing to pay 19 percent.
The new chancellor, Hunt, will be setting out the government’s medium-term fiscal plan on October 31, next to a fully forecast from the independent Office for Budget Responsibility.
This major U-turn is the second to come from Truss after she decided against the array of tax cuts that were initially unveiled as part of the mini-budget.
This included a plan to scrap the additional rate of income tax, something that was set to cost around two billion pounds a year.