What does the Corporation Tax U-turn mean for businesses?

What does the Corporation Tax U-turn mean for businesses?

Lee Murphy, from The Accountancy Partnership, commented: “The level of financial instability that businesses of all sizes across the UK are experiencing is unprecedented, we have had four Chancellors in as many months. Never have businesses been forced to keep up with such rapidly changing government leadership and fiscal policy. While some of the changes announced never actually came into practice businesses will have still altered their strategies based on the terms set out by each Chancellor.

“This is a particularly stressful time for small business owners with many already struggling with the rising cost of living and business. This is leading many entrepreneurs to turn to secondary income sources to help them cope. According to our recent research, one in four new enterprises are created as a side hustle, or second job, to supplement existing incomes. This means that almost 50,000 of the new start-ups established in the part quarter alone were built to serve as secondary incomes, as 201,073 businesses were started in the UK between April-June. It is truly alarming to see just how many Brits need to supplement their primary income source to make ends meet. “

A U-turn in corporation tax changes

“Deciding to U-turn on the September mini-budget and increase corporation tax to 25% is going to exacerbate the strain placed on businesses. This is going to be very unpopular amongst businesses of all sizes and will likely encourage many businesses to consider moving offshore. Businesses facing financial strain are unlikely to be able to afford to continue to operate fully in the UK, adding to the number of companies filing for insolvency – now at the highest rate since 2009.

“This change is going to squeeze profit margins even further, but there are steps businesses can take to make savings. It is now more important than ever that businesses are on top of tax deadlines. Missing deadlines can be very costly for businesses and can lead to paying more tax than is necessary. Companies should also be re-evaluating their overheads and budgets to reveal where any savings could be made. This might involve anything from changing office space to reconsidering suppliers.