Chancellor Jeremy Hunt is being tipped to cut business taxes in his Autumn Budget this week.
Improved public finances mean that the government has about £25billion of headroom to play with when he makes his speech on Wednesday, compared with £6.5billion at the time of March’s budget.
He is likely to extend “full expensing” — a tax relief allowing businesses to offset their investments against corporate tax — having concluded that the policy is less inflationary, and expensive, than previously thought.
And the threshold at which businesses pay VAT could also be increased from £85,000 to £90,000.
In a media round yesterday, the chancellor made clear to that his “priority is backing British business” and changes that “unlock growth”.
Business tax changes on the table
Mr Hunt is widely expected to extend the scheme of tax relief on corporate investment, known as “full expensing”, beyond its 2026 expiry date.
The scheme allows firms to write off the cost of investments in areas such as IT and machinery against corporation tax, offering a potential saving of 25p for every £1 spent.
The scheme comes with a £10billion annual price tag but Hunt believes that it is crucial to boosting Britain’s sluggish growth and growing the economy.
Business rates for small companies will also be frozen and the VAT threshold for small businesses, currently £85,000, is expected to rise.
Income tax and national insurance
Mr Hunt has also not ruled out cutting income tax as he finalises the government's spending plans.
But he told the BBC's Sunday with Laura Kuenssberg programme his speech would focus on removing barriers to growth.
The chancellor was traditionally coy when it came to confirming any of the actual financial decisions he will make before Wednesday.
Mr Hunt said he wanted to put the UK on "the path to lower taxes" but would "only do so in a responsible way" that did not "sacrifice the progress on inflation".
When asked if he would cut income tax, he said he would not comment on a decision ahead of the statement, adding: "Our priority is growth."
Tax levels in the UK are at their highest since records began 70 years ago and are unlikely to come down soon, according to a leading think tank, the Institute for Fiscal Studies.