Cut corporation tax to 15%

Rate change

The costable scenario uses the 2024 Contract: raise the minimum profit threshold to GBP 100,000, cut the main rate from 25% to 20%, then to 15% in year three.

• Main rate falls by 10 percentage points.
• Small-profit threshold rises sharply.
• Full cost arrives after phasing.

Core trade-offs

Companies gain from lower tax on profits, which may improve investment incentives. The Exchequer loses major revenue, and benefits may go to shareholders first.

• Profitable companies and shareholders gain.
• Treasury loses corporation-tax receipts.
• Investment response is uncertain and delayed.

Illustrative fiscal impact

+GBP 25.0bn to +GBP 70.0bn. Central estimate: +GBP 45.0bn.

• Positive numbers mean public-finance pressure; negative numbers mean Exchequer savings.
• 15% target rate is the main scale marker.
• Gross costs and receipt offsets are separated in methodology.
• Behaviour and pass-through widen the range.
• This is not an official costing.

Economic impact by 2029-30

• Jobs: May support investment jobs, but effects are delayed and not guaranteed.
• Wages: Some gains may reach wages if investment rises; shareholders gain first.
• Prices: Little direct CPI effect, though margins may increase.
• GDP / productivity: Potentially positive if investment rises, but likely negative if unfunded borrowing crowds out.

Assessment

A 15% corporation-tax rate is a major business-tax cut. It could improve incentives for mobile investment and profits, but the fiscal cost is large and immediate while investment benefits are uncertain and delayed. If unfunded, the macro effect could be negative despite a pro-investment rationale.

Confidence: Medium-low. HMRC rate ready-reckoners provide scale, but profit shifting, investment timing and threshold effects widen uncertainty.

Main risks

• Shareholder capture: Some gains may accrue to shareholders rather than UK investment or wages.
• Fiscal crowding: Large borrowing needs can raise rates and offset investment incentives.
• Threshold distortions: A GBP 100,000 allowance may encourage profit fragmentation and avoidance.

Safeguards

• Phase only after fiscal offsets are identified.
• Tie allowances to real investment, not passive profits.
• Strengthen anti-fragmentation and profit-shifting rules.

Academic evidence

UK government evidence

Sources

• PolicyLens illustrative scenario methodology: Cut corporation tax to 15% Internal - PolicyLens, 2026
• Corporate income tax reforms and international tax competition Academic article - Devereux, Griffith and Klemm, Economic Policy, 2002
• Business population estimates 2025 Official statistics - Department for Business and Trade, 2025
• Economic and fiscal outlook: business rates receipts Fiscal forecast - Office for Budget Responsibility, 2026
• Direct effects of illustrative tax changes Official tax data - HM Revenue and Customs, 2026
• Reform UK manifesto response Think-tank analysis - Institute for Fiscal Studies, 2024
• The Effect of Corporate Taxes on Investment and Entrepreneurship Academic article - Djankov, Ganser, McLiesh, Ramalho and Shleifer, American Economic Journal: Macroeconomics, 2010
• Our Policies Party policy source - Reform UK, 2026

Other Reform UK policies

• Raise income-tax thresholds
• Cut household energy taxes
• Cut fuel duty by 20p
• Cut stamp duty below GBP 750,000
• Raise inheritance-tax threshold to GBP 2m
• Raise VAT threshold to GBP 150,000
• Abolish IR35 rules
• Replace some high-street business rates