Budget 2011: Osborne slashes corporation tax by 2%

Chancellor George Osborne has slashed corporation tax as part of a bold plan to stimulate Britain's economy and private sector.

Osborne said corporation tax will be slashed by 2% from April - instead of the previously announced 1% - and will continue to fall by 1% in each of the following three tax years as he declared "Britain is open for business".

Today's move, which will reduce corporation tax to 23%, will come as a major boost to businesses as the Chancellor looks to the private sector to reinvigorate the economy.

The 2% reduction will be offset by a £285m hike in the bank levy from next January, the Chancellor said.

Today's move will see a reduction in the corporation tax take of £425m in the financial year to March 2012. The new 23% rate will cut the haul by £1bn in 2014/15.

The move will reduce corporation tax to 23% - 16% lower than the US and 11% lower than France.

Today's sop to large corporates is part of a wider business-friendly Budget designed to kick-start the economy amid signs of a recent slowing.

Osborne said Britain will now have the lowest rate of corporation tax among G7 economies.

Blick Rothenberg says the reduction in corporation tax will encourage firms to invest in UK - a key tenet of the Chancellor's Budget.

Osborne previously pledged to cut corporation tax from 28% today to 24% in 2014. Small businesses with earnings below £300,000 a year pay 21%.

In a further sop to the business world, Osborne said income tax relief on Enterprise Investment Schemes will increase from 20% to 30% in April 2011.

The raft of business friendly initiatives unveiled in Osborne's Budget - dubbed a Budget for growth - follows a call from the British Chambers of Commerce recently to boost business confidence by slashing regulation, cutting red tape and simplifying the taxation system.