UK businesses could be looking at significant new tax burdens, as Chancellor Rishi Sunak seeks ways of balancing the books, following the pandemic.
He is reported to be considering an increase to the corporation tax rate, from its present level of 19% to 24% as one of the measures to bring in vital revenue following the costly furlough scheme and other payments to businesses. This would generate £12 billion for the Treasury over the next 12 months and, although it would be controversial, Sunak would be able to point to the fact that it will bring UK corporation tax rates in line with the global level.
Another step that the government is apparently weighing up is to raise the rate of tax for limited company contractors who pay wages to themselves in the form of dividends. At the moment, these are taxed at a rate of 7.5%, which is well below the 20% basic rate for income tax.
Although it would bring in vital funds, it would impose a harsh financial penalty on the likes of sole traders – many of whom received limited state support during the crisis. The owners of that kind of business may decide they need advice from a qualified accountant for sole traders in Goole or wherever they happen to be, about tax relief that could offset it.
The rumoured plans have been greeted negatively by business leaders, with FSB chairman Mike Cherry arguing that they could discourage those who have been made unemployed from considering setting up their own businesses.