London Daily

Focus on the big picture.
Sunday, Aug 10, 2025

UK's historic business tax hike will face push-back, think tanks say

UK's historic business tax hike will face push-back, think tanks say

British finance minister Rishi Sunak will have to fight to implement the sharp rise in corporation tax that is a key plank of his plans to tackle the coronavirus hit to the public finances, leading think tanks said on Thursday.

Britain’s borrowing is due to reach a post-World War Two high of 17% of economic output in the financial year which ends this month, equivalent to 355 billion pounds.

The deficit should drop back down to 3% of gross domestic product by the mid-2020s, according to forecasts underpinning the budget plan that Sunak announced on Wednesday.

Central to the plan is a hike in corporation tax to 25% in 2023 from 19% now to raise an extra 17 billion pounds, the first rise in the tax since 1974.

But policy analysts said Sunak would face heavy lobbying to backtrack from within his Conservative Party and from businesses during the two years before the tax rise will take effect.

“I will be amazed if in two years the CBI (Confederation of British Industry) is not saying it is absolutely bonkers that we are raising corporation tax to 25%, whereas 23% I think maybe they would have got away with,” Torsten Bell, director of the Resolution Foundation think tank, said.

The CBI has warned that the corporation tax rise would hit investment. The Institute for Fiscal Studies, another think tank, said that would mean the tax would probably raise less than hoped.

Prime Minister Boris Johnson has not always heeded the concerns of business groups. He largely ignored their worries in Brexit talks which resulted in a limited trade agreement with the European Union.

As a sweetener, Sunak has offered businesses a generous, two-year rebate on corporation tax to companies which invest more, hoping to speed up recovery from the COVID pandemic which cost Britain 10% of GDP last year.

The estimated 24 billion-pound cost of the rebate could prove higher as the IFS warned it was open to abuse if businesses stretched the definition of eligible investment.

The other main tax revenue generator is a freeze on income tax thresholds to raise 8 billion pounds a year by 2025.

SPENDING CUTS, BORROWING COSTS


Sunak also faces a challenge to deliver his target of 17 billion pounds of annual spending cuts by the middle of the decade at a time when demands for spending on health and other services are likely to rise.

IFS director Paul Johnson said if Sunak managed to implement his plan, he would meet one definition of a balanced budget - borrowing only to invest - by 2025-26, but at a huge cost.

“The sad truth is that that would be a balance built on the highest sustained tax burden in UK history and yet further cuts in unprotected public service spending,” Johnson said.

Another risk for Sunak comes from Britain’s vulnerability to any jump in borrowing costs.

On its own, a 1 percentage point rise in short and long-term interest rates would cost the government an extra 21 billion pounds a year, Britain’s budget forecasters have estimated.

Normally, bond yields would rise if growth was improving, meaning more tax revenues to offset the higher interest bill.

“The risk that should be keeping Mr Sunak awake at night is that interest rates go up but he doesn’t get the associated rise in revenues,” IFS Deputy Director Carl Emmerson said.

Newsletter

Related Articles

0:00
0:00
Close
Street justice isn’t pretty but how else do you deal with this kind of insanity? Sometimes someone needs to standup and say something
Armenia and Azerbaijan sign U.S.-brokered accord at White House outlining transit link via southern Armenia
Barcelona Resolves Captaincy Issue with Marc-André ter Stegen
US Justice Department Seeks Release of Epstein and Maxwell Grand Jury Exhibits Amid Legal and Victim Challenges
Trump Urges Intel CEO Lip-Bu Tan to Resign Over Alleged Chinese Business Ties
Scotland’s First Minister Meets Trump Amid Visit Highlighting Whisky Tariffs, Gaza Crisis and Heritage Links
Trump Administration Increases Reward for Arrest of Venezuelan President Maduro to Fifty Million Dollars
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Embarrassment in Britain: Homelessness Minister Evicted Tenants and Forced to Resign
President Trump nominated Stephen Miran, his top economic adviser and a critic of the Federal Reserve, to temporarily fill an open Fed seat
The AI-Powered Education Revolution: Market Potential and Transformative Impact
Chikungunya Virus Outbreak in Southern China: Over 7,000 Hospitalized
French wine makers have seen catastrophic damage to vines that were almost ready to be harvested after the worst fires in more than 70 years burned through the south of the country
US Lawmaker Probes Intel CEO’s China Ties Amid National Security Concerns
Brazilian President Lula says he’ll contact the leaders of BRICS states to propose a unified response to U.S. tariffs
Trump Open to Meeting Putin as Soon as Next Week, with Possible Trilateral Summit Including Zelenskiy
Katy Perry and Justin Trudeau spark dating rumors, joining high stakes world of celeb-politician romances
US envoy Steve Witkoff arrived in Moscow to seek a breakthrough in the Ukraine war ahead of President Trump’s peace deadline
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Karol Nawrocki Inaugurated as Poland’s President, Setting Stage for Clash with Tusk Government
Trump Signals JD Vance as ‘Most Likely’ MAGA Successor for 2028
US Charges Two Chinese Nationals for Illegal Nvidia AI Chip Exports
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
U.S. Tariff Policy Triggers Market Volatility Amid Growing Global Trade Tensions
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
Representative Greene Urges H-1B Visa Cuts Amid U.S.-India Trade Tensions
U.S. House Committee Subpoenas Clintons and Senior Officials in Epstein Investigation
Sydney Sweeney Registered as Republican as Controversial American Eagle Ad Sparks Debate
Trump Accuses Major Banks of Politically Motivated Account Denials and Prepares Executive Order
TikTok Removes Huda Kattan Video Over Anti-Israel Conspiracy Claims
Trump Threatens Tariffs on India Over Russian Oil Imports
German Finance Minister Criticizes Trump’s Attacks on Institutions
U.S. Proposes Visa Bond of Up to $15,000 for Some Applicants
U.S. Farmers Increase Lobbying Amid Immigration Crackdown
Elon Musk Receives $23.7 Billion Tesla Stock Award
Texas House Paralyzed After Democrats Walk Out Over Redistricting
Mexican Cartels Complicate Sheinbaum’s U.S. Security Talks
Mark Zuckerberg Declares War on the iPhone
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
Tesla Seeks Shareholder Approval for $29 Billion Compensation Package for Elon Musk
Nvidia is cutting prices on its RTX 50-series graphics cards after sales slowed and inventories piled up
Ghislaine Maxwell Transferred to Minimum-Security Prison Amid Ongoing DOJ Discussions
U.S. Tariffs Surge to Highest Levels in Nearly a Century Under Second Trump Term
×