Corporation tax will rise to 25% as government makes mini-budget U-turn

Corporation tax is to rise as originally planned by Boris Johnson's administration in another mini-budget U-turn by the government.

Prime Minister Liz Truss has announced that corporation tax will rise to 25%, rather than remain at 19%, as was set out in September's mini-budget.

Less than a month after the government revealed a raft of tax cuts designed to stimulate growth in the UK economy, the Prime Minister has backtracked in order to ensure "economic stability".

She said: "Parts of our mini budget went further and faster than markets were expecting, so the way we are delivering our mission right now has to change."

Truss added that the government had to act now to stabilise the markets and protect the UK economy.

The announcement was made in a press conference this afternoon after Chancellor Kwasi Kwarteng was dismissed from his position. Former health secretary Jeremy Hunt has been announced as the new chancellor of the exchequer, while Ed Argar will take over chief secretary to the treasury.

The corporation tax increase will be another blow to the hospitality industry, who while disappointed by the lack of cuts to VAT and business rates in the last fiscal announcement, will be disheartened at yet another bill to be added to their outgoings. That said, to quote the night-time economy adviser of Manchester, Sacha Lord, last month "corporation tax cuts are completely useless if businesses aren't turning a profit, or worse, closed".

UKHospitality Chief Executive Kate Nicholls called on the government to address pre-profit taxes to boost growth in the industry over the longer term.

She said: "Addressing pre-profit taxes by reforming the business rates system, which is currently not fit for purpose and places an unfair burden on hospitality businesses, and introducing a lower rate of VAT would be two galvanising actions from the government that would enable hospitality businesses to grow and also reward the consumer."

The increase to 25% will be effective from April 2023.