Chancellor George Osborne said during Wednesday’s Budget that he would make cuts to both corporation tax and business rates for small firms in the coming year.

Corporation tax

Corporation tax will be cut from 21 per cent to 20 per cent in two weeks time to make it “one of the lowest rates of a major economy in the world”.

Corporation tax is a tax levied on the profits made by companies and permanent establishments of non-UK resident companies and associations that trade in the European Union.

Since the coalition came into power, Chancellor George Osborne has already cut corporation tax from 28%.

Business rates

Small businesses had the relief on their annual rate doubled until next year while rate increases were capped at 2 per cent as announced in last year’s Autumn Statement.

Business rates have increased by 25 per cent in the past six years and many companies say the tax is their biggest burden.

The government launched a review of how it calculates business rates for firms based in England on 16 March.

Business rates are calculated based on the value of a firm’s property multiplied by a figure set by the government every April.

It wants to see whether the system can be modernised, including whether a move away from a property-based tax towards alternative tax bases would be fairer.

Digital tax account

Firms will be able to pay tax at any time via a new digital tax account, which will replace the annual tax return next year.

HMRC will automatically collate the tax affairs of millions of UK taxpayers from employers, banks and investment firms into a single digital tax account which can be checked at any time online.

The accounts will simplify the payment of various levies for businesses.