Cut corporation tax to 15%: calculation note

Central fiscal result

+GBP 45.0bn - Net fiscal impact in 2029-30

Low case: +GBP 25.0bn. High case: +GBP 70.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Main corporation tax falls from 25% to 20%, then 15%.
• Minimum profit threshold rises to GBP 100,000.
• Full target cost is shown in 2029-30.
• No windfall or sector levy is added.

Affected population

• Affected units are companies with taxable profits.
• DBT business counts set the firm-base context.
• Large profitable firms receive the biggest absolute gains.
• Small profitable companies gain from the threshold.

Gross impact

• A 10-point main-rate cut is scaled from HMRC ready-reckoners.
• Threshold rise adds a separate small-company cost.
• Central year-three cost is GBP 45bn.
• Investment response reduces the low case, not central.

Fiscal build-up, central case

• Main-rate revenue loss: +GBP 36.0bn
• GBP 100,000 threshold cost: +GBP 10.0bn
• Profit-shifting and investment offset: -GBP 1.0bn
• Administration: +GBP 0.0bn

Central net impact: +GBP 45.0bn in 2029-30.

Behaviour and pass-through

• Low case assumes stronger investment and profit-booking response.
• Central case assumes most mechanical revenue loss remains.
• High case assumes threshold planning and weaker receipts.
• Benefits to wages are treated as indirect and unscored.

Phasing

• 2026-27: +GBP 3.0bn. Preparation or partial implementation.
• 2027-28: +GBP 25.0bn. Main scenario year.
• 2028-29: +GBP 32.0bn. Behaviour and pass-through develop.
• 2029-30: +GBP 45.0bn. Steady-state uncertainty persists.

Main source groups

• S1: Reform Contract defines the rate path and threshold.
• S2: HMRC ready-reckoners anchor corporation-tax costs.
• S3: DBT business counts frame affected companies.
• S4: Corporate-tax studies inform investment, profit-shifting and location-response assumptions.
• S5: IFS provides external manifesto-scale context.