Corporation tax is set to fall to 21 per cent by 2014 as part of chancellor George Osborne’s plans to create a “competitive” business tax regime.
In his emergency 2010 Budget, Osborne planned to cut the rate from 28 per cent to 24 per cent by 2014, before accelerating this reduction to 22 per cent by 2014 in this year’s Budget. It will now drop further to 21 per cent by the same date.
Delivering his Autumn Statement today, Osborne said other countries have been “scrambling to keep up” with the reductions.
He said: “In America, the rate is 40 per cent; in France it is 33 per cent; in Germany it is 29 per cent. From April 2014, the corporation tax rate in Britain will stand at 21 per cent.
“This is the lowest rate of any major western economy. It is an advert for our country that says: come here, invest here, create jobs here, Britain is open for business.”
The extra decrease in corporation tax will cost £415m in 2014/15 and a further £785m in 2015/16 and £875m in 2016/17.
Osborne says the cut is being funded by an increase in the bank levy, which will also ensure banks see no benefits from the reduction.