UK Corporate Tax Rate Raised for the First Time in Half a Century... From Current 19% to 25% by 2023

Rishi Sunak, UK Chancellor of the Exchequer [Photo by Reuters]

[Asia Economy Reporter Park Byung-hee] The UK has decided to raise the corporate tax rate from the current 19% to 25% by 2023. Over the past year, the government has spent freely to curb the spread of COVID-19, and now intends to replenish the national coffers through tax increases.

On the 3rd (local time), Chancellor of the Exchequer Rishi Sunak presented a budget including additional COVID-19 support measures to the House of Commons, stating that action is needed to address the increase in public debt and announced the plan to raise the corporate tax rate. According to the BBC and others, this is the first time in nearly half a century since 1974 that the UK has raised its corporate tax rate. At a press conference, Chancellor Sunak said that even after the increase, the corporate tax rate remains the lowest among G7 countries and the fifth lowest among G20 members.

Income tax will increase the taxable base and tax amount by not adjusting the personal allowance until 2026. This approach will collect more income tax from over one million people without changing the tax rate.

Instead, the government introduced a 'super deduction' plan that allows companies to deduct 130% of new investment costs. Chancellor Sunak said the 'super deduction' is the largest tax relief ever for businesses.

For the 2020-2021 fiscal year, UK government borrowing reached ?355 billion (approximately 557 trillion won), equivalent to 17% of GDP, the largest scale since World War II. Chancellor Sunak stated that borrowing for the 2021-2022 fiscal year is expected to be ?234 billion, or 10.3% of GDP.

He said, "We will do whatever it takes to support economic recovery," adding that it is necessary and fair for companies and individuals who have earned a lot during difficult times to contribute to debt repayment as the government helps.

Chancellor Sunak predicted that the UK economy will recover to pre-pandemic levels by mid-next year due to the COVID-19 situation. The growth rate is forecasted at 4% this year and 7.3% next year. Last year, it was nearly -10%.

The government will continue support measures to mitigate the impact of COVID-19 for the time being. First, the policy to support up to 80% of wages for employees who have had to stop working due to COVID-19 will be extended until the end of September. Support for the self-employed will also be extended, providing 80% of average profits over three months up to ?7,500, along with VAT reductions for the travel and hospitality industries and reductions in stamp duty for home purchases. The ?20 per week universal credit will be extended until the end of September, and ?5 billion will be provided to offline self-employed workers. Additionally, ?700 million will be allocated to cultural and sports institutions.