Corporation tax is paid by companies on their profits and the rates of corporation tax were included by Kwasi Kwarteng in the mini budget on the 23 September 2022.
The former chancellor Rishi Sunak announced in March 2021 that corporation tax main rate would be increased to 25% from 19% for all profits except ring fenced profits.
The start date for the proposed corporation tax increase was from April 2023 and was only for businesses with a profit of £50,000 and more.
After the £50,000 threshold the percentage rate was to increase gradually to the point where businesses with profits over £250,000 would pay the full 25% rate.
The estimation at the time was that 10% of businesses numbering around 200,000 would end up paying the full 25% corporation tax rate with 70% (about 1.4 million) of businesses being unaffected.
Mr Rishi Sunak V Mr Kwasi Kwarteng Corporation tax
Things have changed politically since the March 2021 budget and Mr Rishi Sunak has been replaced as chancellor by Mr Kwasi Kwarteng.
As part of a mini budget dated 23 September 2022 the new chancellor decided to cancel the corporation tax rises with immediate effect.
The corporation tax rate change is brought in to help stimulate investment and increase economic growth at a time where the cost of living crisis is a national problem.
It is estimated by the treasury that cancelling the rise in corporation tax rates will cost about £29 billon over the next two years.
This can be seen as good news for companies that were staring at a sizeable increase to their corporation tax bill after April 2023.
Mini budget 2022 tax announcements
Cancelling the corporation tax rise was not the only news with other areas of tax being modified as part of a larger effort by the government to help the UK economy in general.
Other 2022 mini budget announcements include:
- Reversing the increase in national insurance which was implemented in April 2022.
- Reducing stamp duty.
- The basic rate of income to be reduced to 19% from the 23/24 tax year starting on 6th April 2023.
On the 23 September a proposal was announced to cancel the 45p rate of tax for higher earners. This idea has since been abandoned meaning the 45p rate of tax will remain as is for higher earners.
Further tax cuts aren’t expected to be announced before the next budget in 2023.
