When an asset is sold for a profit, part of its increased value since acquisition is due to the general rate of inflation. Since 1 April 1982 companies have been able to exclude the inflationary element from taxable gains by deducting the indexation allowance. This reduces a chargeable gain by the effect of inflation as measured by the retail price index (RPI) over the period of ownership.
The allowance will be frozen from January 2018, so gains on disposals will be reduced by the effect of the increase in the RPI from the month the asset was acquired to December 2017.
Landlords who hold their properties within a company benefit from the indexation allowance, but individual landlords who hold their properties in their own names can’t deduct the indexation allowance on sale.
The rate of corporation tax has been fixed until 1 April 2020 at 19%; it will then drop to 17%.
Additional tax relief is being given for spending on R&D projects from 1 January 2018, as the R&D expenditure credit (RDEC) will increase from 11% to 12%. This will generally benefit large companies, but smaller companies which undertake R&D work subcontracted out by larger concerns will also benefit from this change.