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Budget 2011: Corporation tax to be cut by 2% from April

 

The main rate of corporation tax will fall by 2% from April before reaching 23% by 2014, the Chancellor has announced.

 

George Osborne had previously revealed that the main rate would be reduced by 1% from next month.

 

However, in a move aimed at boosting UK enterprise, Osborne revealed that the rate will now fall from 29.75% to 27.5% for the financial year to 31 March 2012.

 

To ensure that the reduction is not a net tax cut for banks, the Chancellor said he would adjust the bank levy rate next year to offset its effect.

 

‘Let it be heard clearly around the world – from Shanghai to Seattle, and from Stuttgart to Sao Paolo:  Britain is open for Business,’ he told the House of Commons.

 

The Confederation of British Industry (CBI) has welcomed the move. ‘The extra 1p cut in corporation tax will help firms increase investment,’ said the group's director general John Cridland.

 

Other measures aimed at helping UK companies included the scrapping of £350 million worth of business regulations, and a three-year moratorium on new regulations for firms with fewer than 10 staff.

 

In addition, the business rate relief 'holiday' for small businesses will be extended for another year. Sweeping changes to the Enterprise Investment Scheme were also announced, alongside a doubling of Entrepreneurs’ Relief, which rises to £10 million from 6 April.

 

The small companies research & development tax deduction will also rise to 200% in April, and to 225% next year.