Rishi Sunak to reverse George Osborne corporation tax cuts and raise rate to 25%

The headline rate of corporation tax will rise from 19 per cent to 25 per cent from 2023, Rishi Sunak has announced.

In a move that effectively reverses the policy of his predecessor George Osborne, the Chancellor said the rise was necessary to make public finances sustainable the long-term.

It comes as the government also moves to freeze the thresholds for income tax, inheritance tax, pensions allowance, capital gains tax, and VAT registration – another way of raising revenue.

The change to the tax on company profits still leaves the UK with the lowest rate of Corporation Tax in the G7, below countries like US, Germany, and Canada.

Mr Sunak said he wanted to reduce borrowing by raising more tax revenue rather than focus on cutting public spending because the Conservatives were the "party of public services".

"The only other alternative would be to increase the rates of tax on working people, but I don't think that would be right either," he said.

But Paul Johnson, the director of the Institute for Fiscal Studies, said: "That's a huge increase in rate of corporation tax. Right at top end of expectations. Extraordinary reversal of longstanding policy. Risky."