Tax Consultancy: A Chartered Accountant’s guide to Corporation Tax changes
The new financial year in April 2023 has brought with it significant changes to Corporation Tax (CT), also known as Corporate Tax, for businesses of all sizes. These changes could end up significantly affecting your bottom line.
CT has been at a flat rate of 19% since April 2017, so this may come as a shock to some business owners who haven’t kept up with financial news.
Read on to find out how your business could be affected by the changes and how our corporate tax planning can help!
The rate of Corporation Tax has increased
First announced by Rishi Sunak in 2021 when he was chancellor, the CT increase was designed to help repay the £100 billion paid out to help support businesses during the pandemic. By helping businesses stay afloat during tough economic conditions, Sunak believed it only fair for those same businesses to help government recovery.
Two years later, on 1 April 2023, the proposed changes have now come into effect, raising the rate of Corporation Tax from 19% to 25%.
However, there are exceptions for smaller businesses which may mean that you do not need to pay the full 25%. These changes will affect your business if it earns augmented profits of less than £250,000 and it has no associates.
How your business could be affected
The new amount of Corporation Tax your business pays will depend on the value of your augmented profits, provided your company has no associates. Augmented profits are calculated to be your company’s total taxable profits in addition to any exempt dividends from non-group companies.
If your business experiences annual augmented profits of less than £50,000, you will continue to pay the original rate of CT at 19%.
For companies with augmented profits of more than £50,000 but less than £250,000, the amount of tax you pay will be calculated on a sliding scale, tapered using a marginal relief calculation.
Businesses with augmented profits of more than £250,000 will pay the full, flat rate of 25%. This is calculated on all profits, including those below the £250,000 threshold.
Close investment holding companies are not eligible for the lower or tapered rates of CT and will be charged at 25% regardless of profit margins.
Associated company rates are more complicated and will be calculated on an individual basis depending on several factors. For a clear breakdown of how your associated companies may be affected, be sure to contact our tax specialists.
How Edwards Accountants can help your business
As Chartered Accountants, it is our duty to provide specialist and tailored tax services. Our team of experts fully understand the impact of the new Corporation Tax changes on businesses of all sizes and will work closely with you to limit their effects as much as possible.
CT also isn’t the only tax that your company will be paying, our experienced team are fully versed in all kinds of corporate taxation. We provide comprehensive, fully managed tax services to help businesses maximise their income and minimise expenditure.
This will help you save both time and money on your accounting processes, allowing you to focus on the growth and development of your business, without the worry of financial complications.
Get in touch
Edwards is one of the leading accounting companies in Birmingham and the West Midlands, though our reputation and client-base spreads across the UK.
If you need to discuss your business finances or you’re in in need of auditing, accountancy or tax consultancy services, our team are always on hand to help. Get in touch with one of our team today to discuss your options!
