UK’s Budget 2011: Britain is Open for Business

March 24, 2011 Taxation in UK

George Osborne, MPThe 2011 budget has been unveiled by the UK government revealing an unexpected hike to tax rates faced by banks and oil companies, and a set of cuts to corporate taxes.

The 2011 budget was presented in the UK Parliament on March 23rd, described by the Chancellor of the Exchequer George Osborne as tax neutral, with the increased levels of taxation, faced by banks and oil companies, being offset by cuts to the corporate rate. As additional taxation measures, the budget will instate increased allowances in personal taxes and reduce fuel duties, and some other measures to improve economic and social stability.

According to the UK Chancellor of the Exchequer George Osborne, the spending cuts and tax rate increases instated over the last two years have brought about economic stability and created an opportunity for a “pro-growth budget”.

Starting from April 2011 the UK’s corporate tax rate will be reduced by 2 percent from the current level of 28 percent. Further 1 percent reductions are scheduled for each of the three following years, bringing the rate down to 23 percent by 2014. The Chancellor explained that the reduced rates were aimed at enticing businesses to invest in the UK, saying; “…let it be heard clearly around the world, from Shanghai to Seattle, and from Stuttgart to Sao Paolo. Britain is open for business.”

The budgetary shortfalls arising due to the reduced corporate tax rate will be compensated for by an increase to the national bank levy, which will be raised to 0.078 percent on January 1st 2012. The oil and gas production industry will also see a tax rate hike, with the supplementary charge levied on their profits being raised from 20 percent to 32 percent.

The proposed 2011 budget also announced an immediate GBP 0.01 per liter fuel duty cut, and the cancellation of planned increases to tobacco and alcohol taxes. In April 2012 the national personal tax allowance will rise by GBP 630 to GBP 8 105.

The new budget is already drawing out debate among analysts, despite having been unveiled less than one day ago. International credit rating agency Fitch ratings commented on the announced measures, saying that the budget was indeed tax neutral, but “…if the economic recovery proves weaker than projected, future Budgets may require additional measures to ensure that the government meets it ambitious fiscal targets.”

Photo by Ewan McIntosh