Amidst all the dramatic resignations and back-stabbings making the headlines post-Brexit, the Chancellor of the Exchequer has been conspicuously quiet, but George Osborne broke his silence yesterday to pledge an upcoming cut to Corporation Tax.

Osborne has announced plans to reduce the rate to below 15% – the lowest of any major economy – to prove to investors that the UK is “still open for business.”

It was previously announced in the 2016 Budget back in March that Corporation Tax would fall to 17% by 2020. But Osborne asserts that changes in circumstances have warranted a change of plan, telling the Financial Times:

“We must focus on the horizon and the journey ahead and make the most of the hand we’ve been dealt”.

Opposing the reduction, Labour Shadow Chancellor John McDonnell called the moves “panic tax cuts promises”, and accused his opposite number of offering Britain up as a tax haven. With years of frustration building over the Government’s nonchalance towards multinational businesses’ tax affairs, the move could certainly fan the flames of unrest even more.

How will this affect small businesses?

As of yet, no time frame for the cut has been announced. More importantly, no indication has been given as to how it will be funded. While a tax cut is generally good news, there is speculation that a compensatory increase in dividend tax may be on the cards – a move which could cancel out the benefits of the cut for freelancers, contractors, and small businesses.

Indeed the previous rounds of Corporation Tax cuts were balanced with hikes in dividend taxes, amongst others. So while high-profit large businesses may benefit overall, smaller owner-operated micro-businesses could end up being even worse off.

Jason Kitcat, Micro-Business Ambassador for Chorus, our free-to-join microbusiness community, will be investigating closely and reporting back when we have some indication of whether there is cause for concern.

 

Header image by mrgarethm