What does the new prime minister mean for tax policy in the UK?
International TaxLegislation

What does the new prime minister mean for tax policy in the UK?

By September 9, 2022No Comments

Liz Truss has recently been elected as the new prime minister of the UK. With tax policy forming a central role in her campaign, this election brings a new economic policy that involves tax cuts and a focus on economic growth.

What changes can be expected for businesses?

Luckily, not many! While the corporate tax rate was set to increase from 19% to 25% as of April 2023, which would have been the first increase in this rate in 50 years, Truss has committed to cancelling the rate increase and will bring in new primary legislation in order to ensure that it stays at 19%.

Truss’s reasoning behind cancelling the planned increase is to keep corporation tax competitive in order to draw in investment and business to the UK. Truss wants to allow businesses headroom to invest and in turn, stimulate economic growth by putting money into people’s pockets. Further, this cut may boost the share prices of big companies, allowing pension pots to increase.

Other plans of the new government within the framework of corporate tax could include deciding the fate of the temporary company capital allowances super-deduction which is set to come to an end on 31 March 2023.

Truss also intends to rule out windfall tax on oil companies in further support of her wishes to grow the economy and encourage investments.

Anything else to note?

Businesses and individuals alike have been threatened by energy bills being pushed to unaffordable levels as a result of the energy crisis that has arisen out of Russia’s invasion of Ukraine. Truss has announced plans to freeze energy prices at their current levels. While the precise plan is yet to be set out, this means that energy prices should be capped at their current levels.

Key takeaways?

The biggest unknown is whether the faster economic growth anticipated is possible without pushing inflation beyond its current near-record highs. However, the cancellation of the increased tax rate could be a boost to companies’ share prices and could encourage investment flows in the UK.
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How can we help?

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Structuring an international business is both a science and an art – this is our specialist area of expertise. Regan van Rooy is an international tax and structuring advisory firm focussing on Africa. We have offices in South Africa, Mauritius and Ireland and we can help you with any international tax or structuring query.