Business reeling from £32bn tax bombshell as Hunt battles to balance the books

Businesses face a £32billion tax bombshell next April as Jeremy Hunt battles to balance the books.

The Chancellor launched a fresh multi-billion-pound raid on companies and entrepreneurs in a move critics said was un-Tory and leaves them taxed ‘into the ground’.

He said the brutal tax rises were required to bring borrowing – which is due to hit £177billion this year – back under control.

The energy sector bore the brunt of the attack after he increased the windfall tax on oil and gas producers from 25 per cent to 35 per cent and extended it until 2028.

That takes the overall tax rate on North Sea firms to 75 per cent.

Hunt also took aim at renewable electricity generators for the first time with a windfall tax set at 45 per cent, targeting the excess profits firms have made since gas and electricity prices soared.

The combined measures will raise almost £15billion next year with Hunt saying he has ‘no objection to windfall taxes if they are about windfall profits’.

The levies come on top of a hike in corporation tax from 19 per cent to 25 per cent in April – raising £11.7billion next year. 

But the sting in the tail was Hunt’s decision to freeze the threshold at which employers start paying national insurance, which will raise £3.1billion next year.

‘Business must pay their fair share,’ the Treasury said. But Deloitte head of tax Amanda Tickel described the national insurance raid as ‘a surprising and significant extra tax burden’.

The moves, which came alongside rises in dividend taxes and capital gains tax, caused outrage among business leaders who warned they could stifle growth.

The measures are expected to hurt investment and force business owners to shed staff.

Over the next five years, the corporation tax rise will bring in more than £80bn while the national insurance raid will cost businesses more than £25bn

Entrepreneur Luke Johnson said: ‘Businesses have been taxed into the ground. This is a mess and doesn’t feel like a Tory government. We have got too used to spending and growing the state.

‘If you’re a budding entrepreneur would you do it when the cost of employing people is so high? 

There will be lay-offs with the freezing of national insurance and the rise in the minimum wage. Businesses will be closing down.’ The Chancellor also made changes to capital gains tax and dividend tax.

Meanwhile, Kwasi Kwarteng’s plans to repeal changes to IR35 payroll rules, which force many previously self-employed workers to be treated as employees by companies wanting to use their services, have also been junked, raising £1.1billion next year.

Hunt also overhauled R&D tax credits for small companies in a raft of tax hikes that in total will raise an extra £32billion next year.

Over the next five years, the corporation tax rise will bring in more than £80billion while the national insurance raid will cost businesses more than £25billion.

Martin McTague, national chairman of the Federation of Small Businesses, warned the Budget was ‘high on stealth-creation and low on wealth-creation’.

He added: ‘Small businesses now face even higher taxes, cuts to innovation, and a recipe for a longer and deeper recession.’