Chancellor weighs up bringing back small profits rate, axed by George Osborne in 2014, to support small to medium-sized companies

Entrepreneurs could be spared an expected hike in corporation tax in next week’s Budget with a lower rate introduced for small businesses, The Telegraph has learned.

Rishi Sunak, the Chancellor, is weighing up bringing back the small profits rate, axed by George Osborne in 2015, to support small to medium-sized companies. This lower rate taxed smaller companies with turnover of up to £300,000 at 20 per cent of profits.

One source said: “They are going to bring back the lower corporation tax rate that got faded out under George Osborne.”

Smaller companies are also expected to be given back a suite of tax allowances for plant and machines which will help manufacturers in the Midlands and the North. As part of the changes, Mr Sunak is expected to increase corporation tax for larger firms to as much as 25 per cent by the end of this Parliament in 2024 at the latest.

The small profits rate was axed by Mr Osborne when he slashed the main corporation tax rate in the first few years of the last decade.

Mr Sunak could also give National Insurance holidays to companies that hire new staff in a bid to encourage firms to take on employees as the pandemic eases, sources say.

Any change would be expected to come in after winding up of the Government’s furlough scheme, which has seen taxpayers fund the jobs of people who cannot work during the pandemic. The furlough scheme is currently due to finish at the end of April.

In a webinar with the Centre for Policy Studies earlier this month, John Glen, a Treasury minister, said there would be measures to support new hires in a webinar with the Centre for Policy Studies earlier this month.

He said: “If businesses are going to be able to hire new people, we need to make new interventions. I am expecting the Chancellor to be very keen to do everything he can in the Budget … to support businesses, to support the maintenance and creation of jobs.”

A CPS report two years ago identified how National Insurance was “one of the main disincentives towards employing people” and said: “This is of particular importance at a time when we are considering how to respond to increased automation and the spectre of future job losses”.

The Treasury declined to comment on speculation about tax ahead of the Budget.   Separately, 20 think tanks from the left and right of British politics have urged Mr Sunak to overhaul council tax and stamp duty to make property taxes fairer.

The thinktanks, including the IPPR, Demos, Centre for Policy Studies,  Bright Blue and the Social Market Foundation, say in a letter: “Households  are already paying comparable property taxes relative to other developed nations – the problem is that the wrong households are paying the wrong taxes at the wrong times.

“We urge you to use the forthcoming Budget to begin this review process, and we would be happy to support the Government with its efforts to introduce a fairer and more efficient system of property taxation that is fit for the modern age.

“We recommend the Government to examine this issue through the lens of fairness, economic activity, social mobility, the Government’s levelling up agenda and the impact of the pandemic on household and local government finances. We look forward to your response and to the upcoming Budget.”

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News – Exclusive: Entrepreneurs could escape Rishi Sunak’s corporation tax rise