British Chancellor George Osborne has announced cuts in the country's corporation tax rates in his Budget speech in the House of Commons.
He said he would cut the corporation tax rate to 26% from next month. A one-point cut to 27% had already been planned.
In addition, the Chancellor said the rate would be cut by one point in each of the following three years, bringing it to 23%.
He told MPs other countries had been 'quite deliberately' making their tax systems more competitive to attract multi-national companies. The UK's bank levy rate is to be adjusted to offset the cut in corporation tax.
Mr Osborne said forecasts from the independent Office of Budget Responsibility indicated that the UK economy would grow by 1.7% this year, lower than the previous 2.1% forecast, due to a weaker than expected final quarter of last year and higher oil prices.
Growth would rise to 2.5% next year and 2.9% in 2013, according to the OBR. The forecasts show that the annual inflation rate will remain between 4% and 5% this year before falling next year. He said UK borrowing this year would be below target at £146 billion.
Mr Osborne announced that the British government would look at merging income tax and national insurance, in an effort to simplify the tax system. He said the move would probably take a number of years to complete.
The last government introduced a £30,000 charge for those who had lived in the UK for seven years. Mr Osborne said he was increasing the charge to £50,000 for non-doms who have been in the country for 12 years.
Mr Osborne said plans to switch air passenger duty from passengers to planes have been dropped, while a planned increase in the duty for this year has been postponed for one year.
The UK's vehicle excise duty is to increase in line with inflation, but it will be frozen for heavy goods vehicles. Fuel duty to be cut by 1p per litre.
North Sea firms face tax rise
Mr Osborne also lifted the rate of tax on companies operating in the North Sea to enable lower petrol prices for motorists hit by soaring oil costs.
'From tomorrow, the supplementary charge levied on oil and gas production will increase from 20% to 32%,' he said. 'Even after this, profits on a barrel of oil are forecast to be higher in the next five years than in the last five years,' he added.
The Chancellor said the move would raise an additional £2 billion for the British government.
