A LEADING accountant has labelled Rishi Sunak's budget as a 'budget for business - with a killer sting'.
Paul Hornby says many of the measures unveiled by the Chancellor of the Exchequer will provide a welcome short term boost for the UK's fragile economy.
But the decision to increase corporation tax to 25% from 2023 could have huge and damaging effects on larger businesses, he said.
Paul, the managing director of JF Hornby, said: "The budget was exactly what I was expecting - plenty of platitudes and superficial announcements to help businesses in the short term - with a killer sting in the tail at the end in the shape of a massive increase in corporation tax.
"There is no doubt many of the measures will help businesses to get back on their feet, especially those which target the hospitality and visitor economy sector that is so important to Cumbria, and they are to be welcomed.
"However we cannot underestimate the impact of an increase in corporation tax which amounts to more than 30 per cent. It is huge - and I have no doubt it will cause serious harm to the medium to longer-term recovery and performances of businesses hit by Covid.
“I further fear how the biggest of businesses will react to this. Let’s not forget we are still dealing with the effects of Brexit and the government is trying to project the UK as a global hub and the place to do business. I’m not sure such an eye-watering hike in corporation tax is conducive to that.”
Mr Sunak used his Budget to extend the furlough scheme and Universal Credit increase as part of a £65 billion lifeline for the economy as it emerges from the pandemic.
But taxes on business profits are set to be hiked from 2023, while income tax thresholds will be frozen meaning more people will be dragged into paying.
The Office for Budget Responsibility (OBR) said raising the headline corporation tax rate, freezing personal tax allowances and thresholds, and taking around £4 billion a year more off annual departmental spending plans would raise a total of £31.8 billion in 2025-26.
The measures announced in the Budget increase the tax burden from 34% to 35% of gross domestic product (GDP) – a measure of the size of the economy – in 2025-26, “its highest level since Roy Jenkins was chancellor in the late 1960s”.
Mr Sunak said the total package of measures – including those already announced – to support the economy amounted to £407 billion.
But he said the unprecedented spending could not continue and he had to be “honest” about putting the nation’s finances back on a sustainable footing.
The point at which people begin paying income tax will increase by £70 to £12,570 in April, but will be maintained at that level until April 2026, meaning more people will be dragged into paying tax as wages increase.
The 40p rate threshold will increase by £270 to £50,270 and then be frozen.
Corporation tax will increase from 19% to 25% in 2023.
But a new “small profits rate” will maintain the 19% rate for firms with profits of £50,000 and there will be a taper above £50,000 so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate – around 10% of firms.
Paul said: “I fully expected a cash grab from somewhere and I understand that the chancellor has to begin to claw back the billions Covid has cost the government. But I fear such an aggressive increase in corporation tax will be damaging.”