As part of the Autumn Budget that was shared in October 2024, the government came up with a ‘roadmap’ for Corporation Tax that should provide more certainty for UK businesses.
After inheriting a ‘fiscal black hole’ from the previous government, the Labour government is attempting to repair public finances and restore stability to the UK economy.
Here’s how their corporate tax roadmap aims to encourage companies to invest in long-term growth by maintaining a stable tax environment over the next 5 years.
Main Corporation Tax commitments
The government’s roadmap sets out the following key commitments to develop and maintain a competitive and supportive Corporation Tax regime in the UK:
- Corporation Tax Rate – Corporate tax will be capped at 25% until 2029, with current thresholds and rates remaining the same for small profits and marginal relief.
- Capital Allowances – First-year allowances for new plant and machinery expenses, the £1 million Annual Investment Allowance, the Structures and Buildings Allowance, and writing down allowances will all be maintained.
- R&D Reliefs – Current rates for Research & Development relief (including the merged expenditure credit scheme and SME relief scheme) will be maintained.
- Loss Reliefs – The established loss reliefs for companies and groups will remain the same.
Should the government need to cut the main rate of Corporation Tax to keep the regime competitive with other markets, the option to do so will remain open.
Potential improvements to Corporation Tax
The government has also highlighted areas for possible improvements to the corporate tax system, such as simplifying capital allowances, extending full expensing to leased or hired assets, and establishing an advisory panel and disclosure facility for R&D relief.
One of the biggest concerns is predevelopment costs for investment in renewable energy, as an Upper Tribunal recently decided the cost of studies before installing wind turbines is not eligible for capital allowances, which discourages investors. The government will be launching a consultation in the next few months to address this issue.
You can read more about this in the corporate tax roadmap on the government website.
Get professional corporate tax advice
If you own a small or medium business and want to ensure you comply with tax rules while making the most of Corporation Tax reliefs, our accountants in Barnsley can help.
Contact gbac for corporate tax assistance by calling 01226 298 298 or emailing your enquiry to info@gbac.co.uk – no matter the size of your company, we can offer tailored solutions.