Budget: Last chance for Jeremy Hunt to soften the impact of corporation tax hike

UK Chancellor Jeremy Hunt will deliver the Spring Statement on Wednesday.
UK Chancellor Jeremy Hunt will deliver the Spring Statement on Wednesday.

WEDNESDAY’S Budget will be the last chance for UK Chancellor Jeremy Hunt to soften the impact from next month’s corporation tax hike, a Belfast accountant has said.

Businesses earning a profit of at least £250,000 will see their tax rate rise from 19 per cent to 25 per cent from April 1, double the 12.5 per cent rate in the Republic.

Companies with profits of between £50,000 and £250,000 will also see their tax rate increase to 25 per cent, but reduced by a marginal relief. The effect will be a gradual increase in the rate businesses pay as their profits rise between the thresholds.

Ross Boyd of RB Chartered Accountants in Belfast said raising the sum where marginal relief kicks in could benefit businesses in Northern Ireland, particularly those competing with firms across the border.

“An area where Mr Hunt could make a real impact in Northern Ireland, and help out owner managed businesses - the genuine backbone of our local economy - is to soften the changes to the dividend tax rate and increase the threshold at which the full 25 per cent tax rate becomes effective.

“For example, if the marginal rate started at £250,000 profit and ended at £1 million profit, the impact would be transformational for many small and medium businesses in Northern Ireland.”

The accountant said the higher corporation tax rate could also have implications for overseas investors looking to establish a base on the island of Ireland.

“If they choose to invest in Belfast, they will now potentially be paying double the corporation tax rate they would be if they decided to invest in Dublin, which looks set to remain at 12.5 per cent.

“When you couple this with a lack of a functioning Executive, a health system under huge pressure and a capable but hugely undersupplied indigenous talent pool – it does not sound like a recipe for a happy St Patrick’s Day for those seeking foreign direct investment.”

The tax hike will coincide with the expiry of the 'super-deduction' scheme, which allowed companies 130 per cent tax relief on purchases of equipment over two years.

Wednesday’s Budget comes in the wake of the Autumn Statement last November, which saw the Chancellor hike taxes as he and Rishi Sunak sought to restore UK financial credibility after Liz Truss' short-lived premiership.

This time, the Chancellor is expected to focus on measures that will get various cohorts back to work as part of a wider push to boost growth.

Measures are expected to involve encouraging the over-50s, the long-term sick and disabled, and benefits claimants back into the workplace.

Changes are also anticipated for sickness benefits, childcare and energy support,

Mr Hunt has also been urged to support motorists facing a 12p-per-litre hike in fuel duty in March.

A 23 per cent increase in the duty is pencilled in for this month, but chancellors have repeatedly frozen the levy in the past.

Mr Hunt has so far not said what he will do.