From April 2023 onwards, the main rate of Corporation Tax will rise from 19% to 25%. Although the current 19% rate will still apply if your profits are £50,000 or less, and anything over will be taxed at a higher rate.
Corporation Tax is paid by all UK companies that generate profit. This does not apply to non-incorporated busiesses like sole traders and partnerships. These are taxed via the annual self-asessemnt tax return (the one that's due at the end of January!)
What has this happened?
The then-Chancellor, Rishi Sunk, first spoke of these rises in March 2021. Then, in September 2022 it was announced that these changes would not happen, scraping the original plans. However, after the market storm following this mini budget, the government did a full 360 turn and Liz Truss confirmed that this Corporation Tax rise WILL go ahead after all. Are you keeping up so far?
What are the new corporation tax rates?
From 1st April 2023, the existing flat 19% rate will be replaced as follows:
Please note that new ‘Associated Companies’ rules also come into effect in April 2023. This means that if two or more companies are ‘related’ in some way (usually by common ownership), then the new £50,000 and £250,000 thresholds are reduced according to the number of associated companies involved.
When will this affect my business?
The new corporation tax rates will be appliacable to all company profits from April 2023. So, if your financial Year End was November 2022. You will pay CT at the old rate of 19% for the first 4 months. Then, from April 2023 onwards, will be calculated as above.
So, what will my new corporation tax bill be?
You can use the governments online CT marginal relief calculator. Click here to head to the calculator!
This is particularly helpful, as it calculates your CT liability if your company accounting year is impacted by both the ‘old’ and ‘new’ CT tax regimes. Most companies will be.
Final thoughts
In its original impact assessment, the Government expect most companies – around 70% – will continue to be taxed at the current 19% rate; with the measure expecting to raise £18bn per year.
We recommend you talk to your us or your accountant if you have any questions about the Corporation Tax increase – particularly if you are likely to be impacted by the Associated Companies rules.
If you need help with this, personal tax, bookkeeping or Xero, please get in touch and one of the team will be happy to help.
Thanks for stopping by,
