Chancellor Rishi Sunak announced an increase in Corporation Tax from 2023, with a new rate of 25 per cent, as he looks to address the challenges of the pandemic.
However, in his Budget statement he also revealed that small businesses will not face the increase, with the creation of a ‘Small Profits Rate’, for companies with profits of less than £50,000, which will be kept at the current 19 per cent level.
Mr Sunak said that meant 70 per cent of companies would be “completely unaffected”. He added that only 10 per cent of all companies, with profits of £250,000 or more, would pay the full 25 per cent rate in two years’ time.
The threshold for paying the basic rate of income tax will rise to £12,570 next year. For higher-rate payers, the threshold will be £50,270. Both rates will stay the same until 2026. The VAT registration threshold will remain at £85,000 until 2024.
Mr Sunak also confirmed a further extension of the government’s Coronavirus Job Retention Scheme (CJRS) in his Budget statement this afternoon.
It was part of a host of measures unveiled in a bid to protect jobs and help businesses on their journey out of lockdown.
Mr Sunak told the Commons a “swifter and more sustained recovery than expected” was being forecast with the economy returning to its pre-Covid level by the middle of next year. However, he added that the economy will be three per cent smaller in five years than it would have been.
The CJRS scheme, which was set to have closed at the end of next month, will now continue until the end of September.
Mr Sunak said the scheme – which pays 80 per cent of employees’ wages for the hours they cannot work in the pandemic – would help millions through “the challenging months ahead”.
The extension to furlough, which has been credited for protecting 11 million jobs at risk from the impact of the Covid-19 pandemic since it was launched last March – had been widely reported prior to his address to the Commons this lunchtime.
The government’s contribution to the scheme will start to be reduced, with employers expected to pay 10 per cent towards the hours staff do not work in July.
Employee contributions will rise to 20 per cent in August and September as the scheme is wound down and the UK economy and businesses begin to reopen.
Around 600,000 more self-employed people will also be eligible for government help as access to grants is widened. Support for the self-employed will also continue until September.
The Treasury has said hundreds of thousands more people will be eligible because tax return information for 2019/20 is now available.
A fourth grant from the Self-Employment Income Support Scheme (SEISS) will be available to claim from April, which will be worth 80 per cent of three months’ average trading profits up to £7,500.
A fifth grant, which will be available from July, was also announced. Those whose turnover has fallen by 30 per cent or more will continue to receive the full 80 per cent grant. Those whose turnover has fallen by less than 30 per cent will get a 30 per cent grant.
Mr Sunak announced an extension to the £20 a week top-up to universal credit for another six months. It will be given as a one-off £500 payment.
In an effort to support the struggling high street and hospitality sector, businesses will be able to get a grant from a £5bn fund set up to help them reopen from lockdown.
Non-essential retail businesses will receive grants of up to £6,000 per premises. Hospitality and leisure businesses will get grants of up to £18,000.
The chancellor said the aim of the new Restart Grant was “to help businesses reopen and get going again.”
The business rates holiday for eligible retail, hospitality and leisure companies will be extended through to the end of June.
Mr Sunak said: “For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open.”
Looking to further protect the hospitality and tourism sectors he confirmed that the five per cent reduced rate of VAT will be extended until the end of September, followed by an interim rate of 12.5 per cent for another six months.
The up-to-£500,000 “nil-rate band” for stamp duty will finish at the end of June, rather than the end of this month.