Corporation tax rate
In line with prior confirmations from the Government, the main rate of corporation tax will be capped at 25% for the duration of this Parliament. The small profits rate (at 19%) will be maintained as will the current thresholds for marginal relief.
Investment reliefs
The key announcements made in respect of investment reliefs were as follows:
- Capital allowances:
- The full expensing regime – the Government will maintain the 100% first-year allowances for companies on qualifying new main rate plant and machinery and the 50% first-year allowances for companies on qualifying new special rate plant and machinery.
- The Annual Investment Allowance, which gives 100% first-year relief for plant and machinery investments up to £1 million, will also be maintained.
- R&D reliefs: the Government has committed to retaining the current rates for both the merged R&D Expenditure Credit and the Enhanced Support for R&D Intensive SMEs.
- Intangible assets: a lower rate of corporation tax for profits attributable to patents and other similar intellectual property (ie, the Patent Box regime) and the current approach to intangible fixed assets will be preserved.
Corporate Tax Roadmap
The Government aims to provide "certainty that encourages investment and gives business the confidence to grow" by setting out scheduled changes to business taxation for the duration of this Parliament, including in respect of the corporation tax rate, capital allowances, R&D reliefs, the intangible assets regime, international corporation tax issues (including transfer pricing and Pillars 1 and 2) and tax administration.
In addition to making the commitments which are set out above in the "Corporation tax rate" and "Investment relief" sections, the Corporate Tax Roadmap sets out the Government's intention to launch a consultation this year to explore the tax treatment of predevelopment costs. In spring 2025, further consultations will be launched (1) on the development of a new process that will give investors in major projects access to advance tax clearances and (2) on widening the use of advance clearances in respect of R&D reliefs. The Government will also explore extending the full expensing regime to assets bought for leasing or hiring, when fiscal conditions allow.
Further, the Corporate Tax Roadmap commits the Government to a second-round consultation on reforms to the UK's rules on transfer pricing, permanent establishments and Diverted Profits Tax, including the potential removal of UK-to-UK transfer pricing. In respect of transfer pricing, the Government will consult in spring 2025 on lowering the thresholds for exemption for medium-sized businesses and introducing a requirement for multinationals to report cross-border related party transactions to HMRC, and will review the transfer pricing treatment of cost contribution arrangements.
Finally, the Government will continue to support obtaining an international agreement on a multilateral solution under Pillar 1 (with the intention of removing the UK's digital services tax) and will ensure the UK's domestic rules reflect internationally agreed updates to Pillar 2. It is also considering opportunities to simplify or rationalise the UK's tax rules on cross-border activities in light of Pillar 2.
Employer NICs
As was widely anticipated after hints from the Chancellor in the run-up to the Budget, the Government has announced increases in employer's National Insurance contributions (employer NICs) to take effect from 24 April 2025. The rate of employer NICs will rise from the current 13.8% to 15% (roughly in line with pre-Budget predictions).
With effect from the same date, the individual salary threshold beneath which no employer NICs are chargeable will be cut by 45%, from £9,100 per annum to £5,000. The latter change will be partially offset by more than doubling the Employment Allowance (a statutory deduction against liability to employer NICs) from £5,000 to £10,500 and extending the allowance so that it is no longer only available to employers whose total annual employer NICs liability is less than £100,000.
Umbrella companies
The Government has announced that, with effect from April 2026, where an employment agency contracts to supply workers to its customers using a so-called "umbrella company", responsibility for the correct operation of PAYE and liability for employer NICs will fall on the agency (or, where no agency is involved, the customer), rather than the umbrella company itself. This change is said to be necessary in order to protect workers from "unscrupulous behaviour" by non-compliant umbrella companies, and implements proposals consulted on by the then Conservative Government last year. Where an agency outsources the operation of PAYE to the umbrella company, the agency will be liable for any shortfall in the amount of income tax and national insurance that the company remits to HMRC.
Employee ownership trusts and employee benefit trusts
The Government has announced a package of measures, taking effect from 30 October 2024, aimed at curtailing what it sees as the "abuse" of employee ownership trusts (EOTs) and employee benefit trusts (EBTs). In broad outline, the measures place additional restrictions on the circumstances in which a disposal of a controlling interest in a company to an employee ownership trust will qualify for exemption from capital gains tax, by providing: (i) that the former owner may not retain control of the company (directly or indirectly) following its transfer to the trust; (ii) that the trustees must be UK resident at the time of the disposal; and (iii) that the consideration given for the shares should not exceed market value. Related measures extend the "vendor clawback period" where the conditions for exemption are breached post-sale. Meanwhile the package includes a new relief for distributions made to EOTs that are used in defraying the trustees' acquisition costs, as well as enlarging the circumstances in which bonuses paid by an EOT-owned company qualify for relief from income tax (permitting directors to be excluded from receiving eligible bonuses).
At the same time, the Government is narrowing the circumstances in which transfers of shares into EBTs qualify for exemption from inheritance tax, notably by requiring the shares to have been held for two years prior to being transferred into the EBT (where there has been a prior reorganisation of share capital, any holding period preceding the reorganisation will be taken into account).