Facing a fragile economic and political environment the Chancellor has presented a Budget that sets out an optimistic three-part plan to support people, fix public finances, and build the future economy. A number of expected and well-trailed moves were made to support lower income households, freeze personal allowances and tax bands, a measured increase in corporation tax, and extensions to much of the COVID relief packages.
The Chancellor gave fair warning that the support over the last year will need to be paid for, and at first glance the focus is on large businesses. The larger-than-expected corporation tax increase to 25% on the most profitable businesses from April 2023 will still allow the UK to claim a competitive rate against international standards. Despite this larger-than-expected increase, there is also the unexpected return to a form of small business profit rate at 19%. The Super Deduction will be welcomed by businesses, particularly those outside of London in the manufacturing sector and continuing on the levelling-up theme, Freeports will offer tax incentives to attract investment both from the South of the country, and internationally.
The Chancellor was silent on a number of initiatives that could be explored to raise revenues, and a package of consultations is expected to be released on 23 March. However, it remains to be seen whether the Chancellor will truly reform the tax system for the future, addressing the challenges of increasing digitisation, the changes to work and wealth creation, climate change and intergenerational inequities.
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