What is corporation tax and who pays it?

The rate of corporation tax was cut rapidly by the Conservatives: from 28% when the party came to power in 2010, to 19% in April 2017.

In March 2021, Rishi Sunak – who was chancellor then – announced the rise in the tax. He said companies should pay more because they’d received so much support from the government during the Covid pandemic.

In July 2022, during the Tory leadership campaign, Liz Truss said she would reverse Mr Sunak’s decision and keep corporation tax at 19%, to attract investment into the UK.

On 23 September, after Ms Truss had become prime minister, the then chancellor Kwasi Kwarteng announced corporation tax would indeed stay at 19%.

The extent of the unfunded tax cuts in their “mini budget” – which also included changes to National Insurance and the top rate of income tax – caused problems on financial markets.

The cost of borrowing for the government and for mortgages both rose considerably and the pound fell against the dollar.

On 14 October, Ms Truss sacked her chancellor and reversed the decisions, saying corporation tax would go up to 25% after all.

On 17 November, new chancellor Jeremy Hunt confirmed the increase.