Speculation concerning what will be announced in Rachel Reeves’ first Budget is rife and many businesses are concerned about possible tax increases in the near future. Sir Kier Starmer has said the Budget will be “tough” and the Chancellor has indicated that tax increases will be necessary to address a £22bn fiscal “black hole inherited from the Tories’’. As she said in her recent address to MPs, “it is vital the tax system supports growth.”
To try and reassure business owners and provide greater stability and certainty for the future, Labour has announced it will be producing a “tax road map for business”. This roadmap will be unveiled in the upcoming Budget on 30 October and will detail what tax policies businesses can expect from Labour over the current term of government.
There are broadly three primary goals behind the creation of this tax roadmap, as follows:
- To offer certainty about taxes and encourage investment;
- To give businesses greater confidence to grow; and
- To support wider economic growth through the tax system.
This article outlines the key elements of Reeves’ proposed tax roadmap for business:
Cap on Corporation Tax
Labour has committed to keep the current rate of corporation tax at 25% for the remainder of this parliament. Although this remains a relatively high rate of tax compared with other countries, it at least gives companies some certainty for planning purposes. In addition, Reeves has indicated an openness to potentially lowering corporation tax if necessary to maintain the UK’s competitiveness. She stated that Labour would “act” if Britain’s “competitiveness is under threat”.
Full Expensing policy will continue
The Conservative party launched a generous capital allowances regime which included “full expensing” for certain asset investments. It enabled companies to offset the full cost of qualifying plant and machinery investments against taxable profits. This policy will continue for the foreseeable future under Labour.
Other business tax changes
The business tax roadmap will include details of other anticipated changes to business taxes, which will gradually be introduced over the course of the current parliament.
Timeline and scope of policies
The new business tax roadmap is due to be published in full within the first six months of Labour’s period in government. It will initially focus on business taxes and is expected to expand to include personal taxes in the future.
For now, you can evaluate what new tax policies might be unveiled in the Autumn Budget in our latest article: 5 ways taxes could increase in the Autumn Budget.