• Chancellor Rishi Sunak announced a freeze to income tax, national insurance and capital gains tax – but will raise corporation tax on larger businesses in 2023 to aid the UK’s coronavirus recovery

• His Budget included an additional £65bn of coronavirus support measures, bringing the government’s total fiscal support measures during the pandemic to £407bn

• The rise in corporation tax will be tempered by what Sunak called a “super deduction”, an initiative that he said could boost investment in business by around £30bn a year

• Meanwhile, the furlough scheme will continue, and VAT in the hospitality and tourism sectors will remain at 5% until the end of September.

Big business will bear the brunt of the cost of coronavirus, the chancellor, Rishi Sunak, revealed in his spring Budget announcement. There will be no increase to income tax, national insurance, VAT, inheritance tax and capital gains tax, while pensions allowances will remain unaffected. However, corporation tax will increase from its current rate of 19% to 25%. Implementation is planned for April 2023, at which point the Office for Budget Responsibility (OBR) anticipates the economy will have recovered.

Sunak reasoned that UK businesses have been provided with more than £100bn of support during the pandemic. “It’s fair and necessary to ask them to contribute to our recovery,” he said, adding that, even at 25%, UK corporation tax will be the lowest amongst the G7 nations.

The increase in corporation tax will be tapered above £50,000, with the full 25% rate reserved for those generating more than £250,000 in profits – equating to 10% of businesses. A separate small profits rate of 19% will be retained for smaller firms.

Sunak also announced a change to the tax treatment of losses, allowing businesses to carry back losses of up to £2m for three years, providing a “significant cash flow benefit”.

In the meantime, the government’s coronavirus support is to be extended. The Coronavirus Job Retention Scheme (also known as the furlough scheme) will continue to run until the end of September, with businesses contributing 10% of furloughed staff’s wages from July and then 20% in August and September. A new Recovery Loan Scheme of up to £10m, with an 80% government guarantee, is also to be introduced, replacing the Bounce Back Loan and the Coronavirus Business Interruption Loan Scheme (CBILS), both of which are due to come to an end shortly.

The business rates holiday is also set to continue for the retail, hospitality and leisure sectors in England. This will continue at 100% through to the end of June before being discounted by two thirds for those businesses that have been forced to close, with a lower cap for those that have been able to stay open. No mention was made of the much sought-after comprehensive review of the business rates system.

VAT in the hospitality and tourism sectors will remain at 5% until the end of September, meanwhile, when an interim rate of 12.5% will be imposed for a further six months before a reversion to the standard rate in April 2022.

As a result of the scale of the economic stimulus, the OBR is now forecasting a swifter and more sustained recovery than indicated in November 2020, with the economy expected to return to pre-coronavirus levels by the middle of 2022, six months earlier than previously predicted. Unemployment is expected to peak at 6.5%, meanwhile, compared to previous forecasts of 11.9% – a difference of 1.8m people.

Nonetheless, the economy has shrunk by 10% – the largest fall in more than 300 years – with the highest borrowing seen in peace time. The OBR still anticipates that the economy will be 3% smaller in 2026 than it would otherwise have been. Sunak said the OBR forecasts growth of 4% in 2021, and 7.3% in 2022, before falling back to 1.7% in 2023.

The chancellor also unveiled a number of proposals to support the UK’s focus on a green recovery and to ensure inclusive growth across the nation. He renewed his commitment to a series of regional projects and a new UK Infrastructure Bank, with an initial capitalisation of £12bn. Meanwhile, the long-discussed freeport scheme finally appears to be coming to fruition, with eight regions initially selected for the special trade zones.

In addition, emphasis was placed on supporting the UK’s global scientific and technological standing, with promises to boost R&D through a new unsponsored points-based visa to attract the best and most promising international talent, as well as radically simplified bureaucracy for high-skilled visa applications across the economy.

Initial responses to the Budget from the business community have been mixed, with questions raised, in particular, over the impact on the long-term competitiveness of the UK. Tony Danker, director general of the CBI, said: “The chancellor has gone above and beyond to protect UK businesses and people’s livelihoods through the crisis and get firms spending. Thousands of firms will be relieved to receive support to finish the job and get through the coming months.

“The Budget also has a clear eye to the future; to ensure finances are sustainable, while building confidence and investment in a lasting recovery,” Danker added, reserving particular praise for the super deduction as a catalyst for firms greenlighting investment decisions.

But he warned: “Moving corporation tax to 25% in one leap will cause a sharp intake of breath for many businesses and sends a worrying signal to those planning to invest in the UK.

“The government must now have a laser-like focus on the UK’s competitive position in the round, including fundamental reform of the unfair business rates system.”