Chancellor George Osborne said the government would slash corporate tax by two per cent from April in a budget which he claimed would put "fuel into the tank of the British economy".
The chancellor claimed the move was to prove "Britain is back in business".
On corporate tax he said: "We used to have the third lowest corporate tax rate in Europe now we have the sixth highest."
He said that the rate would also be cut by one per cent for the three years after the initial drop, eventually taking it to 23 per cent.
However, he said the 50p top rate on high earners would remain unchanged because the time was not right for it to be scrapped.
But the freeze on business rates for small firms would continue for another year.
He announced proposals to merge income tax and National Insurance and launched a consultation, saying they had burdened both employers and the government for years.
Osborne said he did not have enough money in the coffers for a giveaway but saw that fuel charges were crippling families and business.
A planned fuel duty hike has been scrapped, while the duty will be cut by 1p today.
He also froze alcohol duties and air duty - but increased tobacco tax by two per cent.
At the dispatch box delivering the budget he told the house of Commons that the "debt fuelled" policies of the previous administration had left little room for manoeuvre in the public finances.
The growth forecast was downgraded from 2.1 per cent to 1.7 per cent for this year and from 2.6 per cent to 2.5 per cent for 2012.
The Chancellor also announced a shake-up of the tax code, which he said was too complex.
Meanwhile he said 21 new business enterprise zones – where firms can get free business rates and be provided with high speed broadband – would be set up.
A further £100m will be given to research facilities around the UK, with the money coming from the bank levy.
Another recipient of help is The Green Bank – which from 2012 will focus on green energy projects. It will receive a £2bn payment on top of the £1bn already agreed.
Meanwhile Osborne introduced measures to cut tax evasion, so saving the Treasury £1bn.
Labour leader Ed Miliband dismissed the budget as "more of the same"
He said: "Nobody voted for this deficit plan. There is little reason [the budget growth measures] will make the difference to growth we need"