Sunak Reveals "Unprecedented" Tax Cut For Businesses Investing After The Pandemic
Rishi Sunak has announced that companies will be able to reduce their tax bill by up to 130% when they make investments in a policy “never tried before in our country”.
Sunak said that it would be “the biggest tax cut in modern British history” and was expected to increase annual business investment by £20 billion.
“It makes our tax regime for business investment truly world-leading, lifting us from 30th in the OECD, to first,” he told MPs on Wednesday afternoon.
Giving an example of how the policy would work in practice, Sunak said a construction firm spending £10m on new equipment would be able to reduce their taxable income that year by up to 130%.
This “unprecedented” step would encourage businesses to make major investments as the economy recovers from the coronavirus pandemic, Sunak said.
Details of how the scheme will work are not yet known.
However, Sunak said it would boost the economic recovery by encouraging businesses that "have been able to build up significant cash reseerves" during the pandemic to make major investments.
Follow our live blog of Rishi Sunak's budget for all the key updates as they happen...
The “Super Deduction” was one of the stand-out policies in the Budget announced by Sunak.
The Chancellor said that the UK economy had shrunk by 10% as a result of the coronavirus pandemic and that he wanted to be “honest” about how the government planned to repair public finances.
He confirmed reports that the UK would be raising corporation tax to 25% in 2023, from its current level of 19%.
Sunak reassured Conservative MPs that the tax on the profits of big businesses would still be lower than any other country in the G7 and just 10% of companies were expected to pay the highest rate.
As for personal finances, the Chancellor said that had decided to freeze personal tax thresholds in order to generate more money for the Treasury.
The freezes will come in from next year once planned increases have taken place, Sunak said.
The rate at which people start paying tax will be frozen at £12,570 until April 2026, while the higher rate threshold will be frozen at £50,270 for the same length of time.
The tourism and hospitality sector were also given a boost from the Budget, with Sunak saying the temporary reduced rate of VAT set at 5 per cent on goods and services supplies by those sectors would be extended until 30 September 2021. A temporary rate of 12.5 per cent will then apply until 31 March 2022 before returning to the full 20 per cent rate.
Meanwhile, Sunak announced a number of planned increases in duties would be scrapped, including those for spirits, wine, cider and beer.
He said the decision to freeze all alchohol duties for the second year in a row was an acknowledgement that hospitality firms were facing a "tough time".
A planned increase in fuel duty was also scrapped but the full Budget documents hint rises could come as it stated future fuel duties would be "considered in the context" of the UK's commitment to reach net-zero emmissions by 2050.
But while some key freezes were announced, the full details of the Budget confirm other taxes will increase as planned, including an increase in Air Passenger Duty from April 2022 in line with inflation.
The Budget report added: "The rates for long-haul economy flights from Great Britain will increase by £2, and the rates for those travelling in premium economy, business and first class will increase by £5. Those travelling long-haul by private jets will see the rate increase by £13."
Road tax will also increase in line with inflation from 1 April 2021 for cars, vans and motorbikes, but haulage firms will see their road tax frozen until August 2022 in a bid to help them recover from the hit to their business caused by the pandemic.
PoliticsHome provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe