In line with the government’s need to keep the UK as competitive as possible in the Brexit world, the Chancellor continued to cut the UK’s corporation tax rate bringing it down to 19% from 1 April
From the new tax year 2018/19, the corporation tax rate will be cut to 19%, which reflects a massive fall from the high of 28% before the 2008 crash. The new rate will come into force from 1 April.
The UK now has the lowest corporate tax rate in the G20.
The rate will be cut to 17% in 2020. The cut in the corporation tax is not expected to reduce the overall tax take substantially with the Exchequer predicting that revenue will only drop by £1bn from £53.5bn to £52.5bn in the first year of the new lower rate of 17% and then is likely to stabilise at around £53.5bn in 2021-22.
The measure is designed to attract inward investment particularly in the light of the Brexit environment.
Chancellor Philip Hammond said: ‘We have an economy that has continued to confound the commentators and deficit down by over two thirds. As we prepare to exit Brexit, this Budget builds a foundation of a fairer, more global Britain.
‘Last year, the British economy grew faster than US, Japan and France; Brit economic growth is second only to Germany last year. But there is no room for complacency as we prepare for our future outside the EU.’
As set out at Autumn Statement 2016, the government will cut the rate of corporation tax to 19% from April this year and then again to 17% in 2020. The government argues that this offers business greater stability around their tax planning and investment decisions as there are less frequent changes to tax rates. Arguably this is somewhat undermined as the wider tax landscape is littered with major tax changes beyond the base corporation tax.