Corporation Tax

What You Need to Know About the Corporation Tax Changes

As of 1 April 2023, changes to Corporation Tax (CT) rates have come into effect, impacting businesses across the UK. In this article, we will discuss what you need to know about these changes and how they could affect your business.

The New Rates

The main rate of Corporation Tax has increased from 19% to 25% for the most profitable companies. For companies whose accounting period straddles 1 April, profits will need to be apportioned between those that arose up to 31 March and those that arose after 1 April.

For small companies with profits up to £50,000, CT will remain at 19%. Companies with profits of £250,000 and over will pay CT at 25%. Companies with profits over £50,000 but under £250,000 will pay on a sliding scale of between 19% and 25%.

Marginal Rate Relief (MRR)

Where companies have taxable profits between these two thresholds, the rate of tax they pay will depend on their level of profit due to Marginal Rate Relief (MRR). This is a tapered relief that increases in line with a company’s profits. The basic method used by HMRC to calculate this relief is quite complex, so it is advisable to seek advice from your professional advisor.

What Does This Mean for Your Business?

The changes to CT rates will impact businesses differently depending on their size and profitability. It is essential to review your company’s tax position carefully to understand how the changes will affect your bottom line. Seeking advice from AIT Accountants can help ensure you make informed decisions and minimise the impact of the changes on your business. Get in touch for tax support.