This will raise £18bn for the Exchequer and will see corporation tax for larger businesses increasing from 19% to 25%.
Speaking at a brief press conference, Liz Truss said: ‘Parts of our mini Budget went further and faster than markets were expecting. We need to act now to assure markets of our fiscal discipline – we have decided to keep corporation tax rise and this will raise £18bn a year. It will act as a downpayment on our full medium term fiscal plan which will be accompanied by a full OBR costing.’
However, this still leaves an estimated £25bn in unfunded tax cuts.
Simon Crookston, partner at Crowe UK said: ‘There are two things that businesses require from a progressive tax system, to enable it to function efficiently: ‘simplicity’ and ‘certainty’. The continual U-turns, like today’s rise in corporation tax to 25%, are very unhelpful for business.’
Truss added: ‘Spending will grow less rapidly than previously planned.
'Today I have asked Jeremy Hunt to become the new Chancellor – he is one of the most experienced and widely respected parliamentarians and he shares my convictions for this country.
'He will drive our mission to drive for growth including the supply side reforms.'
She added: ‘I’m absolutely determined to see through what I promised – to see us through the storm we face.’
On the sacking of Chancellor Kwasi Kwarteng Truss said: ‘It was right in the face of the issues that we had that I acted decisively as that is vitally important to people and businesses across the country.’
Truss was the driving force behind the policies set out in the mini Budget and shaping economic policy, which were a critical part of her leadership challenge for the Conservative party over the summer. She has now sacked the Chancellor and says the growth plan will not be achievable as originally set out.
‘My priority is that we deliver the economic stability that this country deserves. We do need to raise our economic growth levels, and we are delivering on the energy price guarantee. I have to act in the interests of the country.’
‘I have made sure that we have economic stability in this country. Jeremy Hunt shares my desire for a high growth economy. We have to deliver the mission in a different way – achieving that stability in a very difficult global world.
‘We need to have a high growth economy but we have to recognise that we are facing a difficult time as a country – we need to focus on long-term sustainable growth.’
The changes in tax rates continues to undermine certainty in the tax system for businesses.
Katharine Arthur, partner and head of private client at haysmacintyre, said: ‘Today’s announcement that the corporation tax rate will increase to 25% from April 2022 marks the second major U-turn in less than a month, which begs the question: how many more will there be?
‘The rationale behind the move is obviously to repair confidence in markets and in the pound, but whether it will be sufficient is unclear, especially given that a 6% increase in corporation tax will undoubtedly be challenging for companies attempting to deal with the wider cost increases and rise in interest rates.
‘Ultimately, confusion and uncertainty do not breed confidence, and without a clear sense of direction we are likely to see continued anxiety among markets, businesses, and individuals.
‘Businesses and the economy need clarity and given that we still lack the essential OBR forecasts, and with the fourth Chancellor in a year set to move into 11 Downing Street, it is hard to see where this will come from.’
Reacting to the change of Chancellor, Glenn Collins, head of ACCA UK, said: ‘Following Mr Hunt’s appointment today, we urge the new Chancellor that more needs to be done on issues such as spiralling cost pressures, rising inflationary pressures, the impact of rising interest rates and falling demand which will put many otherwise viable enterprises into critical condition.
‘The recent market volatility has significantly increased the risks to business and any continued political turmoil will continue to do so.
‘At the time of the mini Budget ACCA expressed disquiet over the government failure to involve the Office for Budget Responsibility (OBR) and the market turmoil we’ve seen as a result has highlighted the importance of independent assessments of fiscal statements - to ensure proper accountability and transparency.’