October 27 2021

United Kingdom Budget Affirms Commitment to Raising Corporate Tax Rate to 25%

Source: IBFD Tax Research Platform News

On 27 October 2021, the United Kingdom (UK) Chancellor of the Exchequer, Rishi Sunak, presented the 2021 Autumn Budget to the House of Commons with a view to encouraging economic recovery from the COVID-19 pandemic through promoting investments in infrastructure, innovation and skills, levelling up public services such as the national health service (NHS), and public cultural institutions such as regional museums, libraries and orchestras, as well as strengthening working families' and the financial position of low-income earners. In this context, the UK Chancellor announced the following tax measures:

  • the corporation tax rate increase from 19% to 25% effective from April 2023, which was announced as part of the March 2021 Budget has been maintained;
  • the bank surcharge rate will be decreased from 8% to 3% with effect from April 2023;
  • the business rates system for companies in the retail, hospitality, and leisure sectors will become fairer with cancellation of the planned increase in the tax rate multiplier due to inflation and the introduction of a 50% business rates discount lasting for 1 year;
  • the GBP 1 million annual investment allowance for companies will be extended until April 2023;
  • a new investment relief, encouraging investment in green technologies such as solar panels will be introduced;
  • flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower air passenger duty rate effective from April 2023, whereas a new increase in the air passenger duty rate, covering ultra-long-haul flights of over 5,500 miles with an economy rate of GBP 91, will become effective from April 2023;
  • the alcohol duty regime will become simpler, fairer and healthier through the reduction of the current number of duty rates from 15 to six (6) and the introduction of a the-stronger-the-drink-the-stronger-the-rate system. A 5% cut in alcohol duty imposed on draught beer and cider served from draught containers over 40 litres will be introduced. Also, there will be alcohol duty cuts on drinks made from fruit, such as cider, as well as on the sparkling wine premium. Finally, the planned increase in the alcohol duty on spirits, such as wine and whiskey, will be cancelled;
  • the tonnage tax shipping regime will become simpler and more competitive through the rewarding of shipping companies adopting the UK flag;
  • the planned increase in fuel duties will be cancelled;
  • the residential property developers' tax on developers with profits over GBP 25 million will be set at a rate of 4%;
  • the heavy goods vehicle (HGV) levy will be suspended until 2023 and the vehicle excise duty for heavy goods vehicles will be frozen; and
  • the universal credit taper tax rate will be decreased by 8%, from currently 63% to 55% in order to financially support lower-income working individuals. The decrease will take effect no later than April 2022.