Corporation tax changes ahead
The 1st of April 2023 will see a substantial increase to corporation tax for UK businesses. The current rate stands at 19% for all businesses no matter what their size, however this will be increasing to 25% for companies with profits above £50,000 from next year. All companies whose profits fall below this threshold will continue to pay the current rate of 19%.
There is however, some good news for those companies facing this huge increase, if their profits fall between £50,000 and £250,000 it may be possible to claim Marginal Small Companies Relief (MSCR), allowing for a tapering of the new rate. However, the formula used is complex and not necessarily beneficial. Thus, depending on the profit levels of the business, it may be of more benefit to plan ahead in order to reduce profit margins so that they fall below this marginal rate relief limit. Strategies such as pensions contributions and large equipment purchasing can be utilised to achieve this.
There are many things that must be considered when planning for this new rate, including when there are multiple companies, the impact on dividends and the situation for companies vs sole traders and partnerships.
For help and advice on understanding and planning ahead for the corporation tax increase, please call us on 01173 700 079 or e-mail firstname.lastname@example.org.