Corporation Tax Changes
Corporation Tax Changes
It is oddly reminiscent of the tax rate system back in 2014, though with a few changes.
August 29, 2022

Tax Rate
Currently the Corporation Tax rate for all companies is 19% regardless of profits. But from April 2023 there will be new rates implemented depending on the level of taxable profits of your company. It is oddly reminiscent of the tax rate system back in 2014, though with a few changes.

For small businesses whose profits are £50,000 or under the current tax rate of 19% will still apply. Though for companies with taxable profits of between £50,000 and £250,000 there will be a sliding scale of between 19% and 25%. These companies may also be able to claim marginal relief.

Marginal relief may be claimed if the company’s taxable profits before 1st April 2015 are between:

  • £300,000 (Lower limit)
  • £1.5 million (Upper Limit)

If there are associated companies, then the limits would be divided between these companies. Companies are associated if:

  • One of the companies has control of the other
  • Both companies are controlled by the same companies or people.

Also, if the accounting period is less than 12 months then the limits are reduced proportionally.

Tax Payment Frequency
Some other changes taking place in April 23 are in relation to tax payment dates. Currently a company’s Corporation Tax liability is due 9 months and 1 day after the accounting period, unless the company is considered “large” or “very large”, then they need to pay quarterly.

From April 23, the rules for which companies are “large” or “very large” are changing. The thresholds are remaining the same as they are currently:

  • Large companies have profits equal or higher than £1.5m
  • Very large companies have profits equal or higher than £20m

These limits will now be divided between “associated companies” rather than the current “group companies”. The definition of associated companies is the same for the marginal relief, which is described above.

Things to also consider:

  • Would restructuring be beneficial?
  • If you have associated companies, what will the impact of the new tax rate be? And will you have to start paying the company liability quarterly?
  • Losses. Would carrying them forward or back be more beneficial?
  • Disposal of company assets. Should you wait or sell them now?

Contact us to see how you can best benefit from the rate change or to discuss how this change will affect your company.

The information contained in this article is based on the opinion of Hive Business and does not constitute formal tax advice. Any tax outcomes will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future. You should seek specific advice before embarking on any course of action. Hive Business does not provide regulated Financial Advice, including advice on investment, insurance or lending products or their suitability for you. This article is provided for information only and does not constitute, and should not be interpreted as, investment advice or a recommendation to buy, sell or otherwise transact, or not transact, in any investment including Bitcoin and other crypto. Any use you wish to make of any information contained within this article is, therefore, entirely at your own risk.

By Nikita Richards Accountant
If you have any questions or comments about this article, please get in touch.
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