Corporation tax has been increased to help pay for the Covid-19 recovery, Rishi Sunak has announced.
The Chancellor said the rate would rise from 19% to 25% - though he said this would remain the lowest in the G7.
And smaller companies will be exempt from the increase - with a taper above profits of £50,000 to ensure only the top 10% of firms would pay the top rate.
And Mr Sunak announced a "super deduction" to encourage firms to make urgently needed investments.
He told MPs: "Even after this change the UK will still have the lowest corporation tax rate in the G7 - lower than the United States, Canada, Italy, Japan, Germany and France."
He added: "First, this new higher rate won't take effect until April 2023, well after the point when the OBR expect the economy to have recovered. And even then, because corporation tax is only charged on profits, any struggling businesses will, by definition, be unaffected.
"Second, I'm protecting small businesses with profits of £50,000 or less, by creating a small profits rate, maintained at the current rate of 19%. This means around 70% of companies - 1.4 million businesses - will be completely unaffected."
Announcing the "super deduction", the Chancellor said said the UK will have a "pro-business tax regime" but more needs to be done to encourage immediate investment.
He told MPs: "While many businesses are struggling, others have been able to build up significant cash reserves. We need to unlock that investment, we need an investment-led recovery.
"So today I can announce the 'super deduction'. For the next two years, when companies invest they can reduce their tax bill, not just by a proportion of the cost of that investment, as they do now, or even by 100% of the cost, the so-called full expensing some have called for - with the super deduction they can now reduce their tax bill by 130% of the cost."
It is forecast to boost business investment by 10%, or around £20 billion extra per year, Mr Sunak said.
The Chancellor said the Covid-19 pandemic had fundamentally changed our way of life.
He said: “People are still being told to stay in their homes, businesses have been ordered to close. Thousands of people are in hospital
“I said I would do whatever it takes. I have done and I will”
And he admitted the damage to the economy had been “acute” - with some 700,000 people losing their jobs and the largest shrinking of the economy in 300 years.
But he said the figures showed the government’s response to coronavirus was “working”.
And he said the Office for Budget Responsibility said the economy would be back to pre-Covid levels six months earlier than previously forecast.
Several early reports had indicated the Chancellor would reverse some of the Tory cuts to corporation tax, raising it to as high as 25%.
Unusually for Labour, who have vowed to oppose "immediate" tax rises in the Budget, Keir Starmer's party could end up siding with Tory rebels to oppose a hike on big business.
Before Covid struck, Labour pledged in 2019 to reverse the bulk of Tory corporation tax cuts for large firms to fund the party’s radical agenda.
But with businesses hit by lockdown, Keir Starmer said at PMQs last week: “Now is not the time for tax rises for families and for businesses.”
A Labour source later clarified the party did not oppose the idea of corporation tax rises in general - but did oppose an immediate rise while Britain is in thick of the pandemic.
The main rate of corporation tax was slashed from 28% to 19% under a decade of Tory rule.
In the 2019 election Labour pledged to reverse most of these cuts and bring the rate back to 26%.
Workers for struggling firms were also handed a lifeline in the form of an extension to the furlough scheme through to September.
The move, confirmed last night, will see employers asked to contribute towards furloughed workers pay from July, by which point the Government hopes lockdown rules will have been eased.
