Cut Corporation Tax
Down from 25%, competitive with the US and below most of Western Europe.
The measure
Cut the tax on profits by a fifth to 20%
A Corporation Tax cut might feel counterintuitive and in isolation, hard to defend.
In the context of this reform however, it is part of a package that makes the UK genuinely and distinctively attractive for businesses that employ people.
We are also taxing accumulated wealth which means excessive profits are addressed downstream. Reinvestment or putting profits into UK pension funds is encouraged driving further growth and improved living standards.
We want the total cost of building a business, employing people and operating premises in the UK to be low.
We want Britain to become uniquely competitive again.
Expected impact
- More businesses invest in the UK as the headline rate falls
- 100,000–200,000 more jobs from increased business investment
- The UK becomes the most competitive major economy for businesses to operate in
- Combined with no employer NI, no developed economy comes close on employment costs
- Lower rate; higher take as more businesses invest and grow
Cost and revenue
| Revenue change | Annual |
|---|---|
| Current corporation tax revenue (25% rate) | £70bn |
| New corporation tax revenue (20% rate) | £60bn |
| Net revenue cost | −£10bn/year |
The −£10bn is factored into the overall fiscal picture, which still produces a £34bn surplus across all measures. A claw-back mechanism protects the revenue case: if fewer than 400,000 new jobs are created by the end of Year 2, the rate reverts to 22%. If the shortfall continues, to 25%. The cut must earn its place.