Nadhim Zahawi, the new chancellor of the exchequer, may overturn his predecessor Rishi Sunak’s decision to raise corporation tax for small business from next April.
The planned corporation tax rise from 19 per cent to 25 per cent would raise £17-20bn for the UK’s battered economy if it goes ahead, according to estimates.
Speaking this morning, Mr Zahawi said: “When boards invest, companies invest, they invest for the long term and they do compare corporation tax rates… So I will look at everything.”
Mr Zahawi said he’s “determined to do more” to cut taxes as he pledged to rebuild the struggling economy amid the worst cost-of-living crisis in a generation.
“Nothing is off the table. I want to make sure we’re as competitive as we can be while maintaining fiscal discipline.”
Downing Street is known to want Treasury to cut taxes such as VAT — and cancel planned tax rises — to help the cost-of-living crisis but had pushback from Treasury officials.
However, the new chancellor chimed with the latest British Chambers of Commerce business sentiment survey when he said, “the important thing is to get inflation under control”. Inflation is the number one concern for business owners.
Who is Nadhim Zahawi?
Unlike his predecessor Rishi Sunak, Nadhim Zahawi has actually owned a small business. Having fled Iraq as a child as an Iraqi Kurdish refugee, He began business life distributing tee-shirts and Teletubbies merchandise to retailers including Marks and Spencer.
In 2000 he co-founded polling company YouGov, which specialised in online surveys, and floated on the stock market five years later.
He has also built a hugely profitable property portfolio, making him one of the richest men in the House of Commons.
Zahawi became an MP in 2010 and joined government as a junior education minister before moving on to become an industry minister.
One source told the Financial Times that Zahawi has “a back-story of aspiration, drive and progression”.
How much extra corporation tax will you have to pay?
If Mr Zahawi decides to leave corporation tax untouched then the rate will increase to 25 per cent from 1 April 2023 – but not for every small business.
Instead of a flat 25 per cent corporation tax rate, the government will inroduce a Main Rate and a Small Profit Rate, so the amount of tax you pay will depend on your company’s profits.
Companies whose profits are over £250,000 will pay the Main Rate of 25 per cent.
A Small Profit Rate at 19 per cent will apply to companies whose profits are below £50,000.
Businesses whose profits are between £50,000 and £250,000 will pay 25 per cent but that will be offset against Marginal Relief, which will reduce the amount they actually pay.