Small and medium sized businesses were given a boost in today’s Budget with what George Osborne called “fundamental reform of the business tax system”.
Speaking to MPs in the House of Commons today the Chancellor revealed plans to cut corporation tax from 18% in coming years to 17% by April 2020.
This will be partly funded by new measures to allow firms to use losses “more flexibly” in a way that he claimed would help over 70,000 mostly British companies.
He said: “We’ll do what other countries do and restrict the maximum amount of profits that can be offset using past losses to 50%.
“This will only apply to the less than 1% of firms making profits over £5m – and the existing rules for historic losses in the banking sector will be tightened to 25%.
“But our policy is not to raise taxes on business. Our policy is to lower taxes on business. So everything we collect from the largest firms who are trying to pay no tax will be used to help millions of firms who pay their fair share of tax.
“I can confirm today we’re going to reduce the rate of corporation tax even further. That’s the rate Britain’s profit-making companies – large and small – have to pay.
“And all the evidence shows it’s one of the most distortive and unproductive taxes there is.”
Corporation tax was 28% at the start of the last parliament and 20% at the start of this one.
Osborne added that the plans were “a roadmap to make Britain’s business tax system fit for the future”.
He said: “It will deliver a low tax regime that will attract the multinational businesses we want to see in Britain, but ensure that they pay taxes here too.
“And it will level the playing field, which has been tilted against our small firms.”
Osborne went on to confirm further support for small businesses with swingeing cuts to business rates.
At present small business rate relief is only permanently available to firms with a rateable value of less than £6,000.
The new threshold for small business rate relief will raise from £6,000 to a maximum threshold of £15,000 permanently.
The threshold for the higher rate will also rise from £18,000 to £51,000.
Osborne said: “Business rates are the fixed cost that weigh down on many small enterprises.
“From April next year, 600,000 small businesses will pay no business rates at all.
“That’s an annual saving for them of up to nearly £6,000 – forever. A further quarter of a million businesses will see their rates cut.”
Osborne also introduced two new tax-free allowances each worth £1,000 a year, for both trading and property income.