Chancellor to reduce rate further to 22% by 2014

Money

Government has pledged to cut UK corporation tax by 2% to 24% in April 2012, compared with the 1% originally planned.

The 2012 cuts follow a 2% cut to 26% from 28% in 2011.

This year’s cuts will be followed by further reductions of 1% in 2013 and 2014 as detailed in last year’s Budget.

The deeper 2012 cut means that the tax rate will now be 22% by 2014, instead of 23%.

Describing the cuts as the “biggest sustained reduction in business tax rates for a generation” and an “advertisement for jobs and investment in Britain”, UK Chancellor George Osborne said in his Budget speech that a simpler and transparent tax system was needed which businesses could easily navigate.

He also vowed to radically change the administration of tax for the UK’s smallest firms and would consult on simplifying tax for firms with a turnover up to £77,000.

Among the other changes outlined in the Budget was a reduction in the top rate of income tax to 45% from 50% from April 2013.

The Chancellor added that he would expand the enterprise finance guarantee scheme for SMEs.

Saying that the UK would avoid a technical recession due to positive growth in the first quarter of 2012, he revised his growth forecast for this year to 0.8% from 0.7%, but cut next year’s estimate to 2% from 2.1%. Inflation is also forecast to fall from 2.8% this year to 1.9% in 2013.

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