From 2020 the corporation tax rate in the UK will be 17% which means a genuine tax cut for businesses.
The UK government has announced that from 2020 the corporation tax rate will be 17%. This is a further 1% on the changes already stipulated and means a genuine tax cut for businesses. So how will this 17% tax rate affect the UK? Let’s take a look.
The government says that normal families will hardly see any difference. It won’t affect their daily activities. Where changes really hit hard, in a positive way, is with businesses, with around 1.1 million businesses in the UK set to benefit. They will effectively see a reduction in their tax bill.
Do will there be a lot of changes to red tape and a difficulty adapting to the new measure? The simple answer is no. There will be a negligible amount of research and information gathering that businesses will need to do to in order become accustomed with the new legislation. Other than that the red tape for both the HMRC and small businesses will not really change.
It is anticipated that GDP will increase by over 0.6%, and perhaps as much as 1.1%, as a result of this measure, in the long term. This is as a direct result of companies choosing to keep their profits in the UK, and increased investment in the UK, as well as increased growth prospects of businesses currently seeking to develop in the UK. This is a measure that is designed to propel growth, and facilitate a healthier UK economy. It will set the corporation tax rate as the lowest in the G20.
For companies like AXA insurance, who deal with insurance products for businesses and property investors, this will somewhat offset the hikes in the buy to let taxes that have come in. It may make investing in property a little bit sweeter, and therefore keep the prices of houses that bit higher than they would be otherwise. The UK is a home buying nation, and anything that impacts on the dynamic of the home owner/landlord balance will have wide and deep effects on the UK economy, and the UK people. It remains to be seen how much this tax will affect the housing market, but it may be the positive swing that landlords need to invest again.
Overall, the effects of this tax rate decrease are likely to be positive. The reduced income is going to be offset by growth, and anything that gets businesses hiring and innovating once more is good for the UK economy.