Corporation Tax on company profits set to increase
The Government has confirmed that it plans to press ahead with the increases in Corporation Tax from 1 April 2023.
Corporation tax rates from 1 April 2023 are as follows:
- company profits up to £50,000, the rate is 19%;
- company profits of £50,001 to £250,000, a marginal rate of 26.5% applies; and
- company profits of over £250,000, the rate is 25%.
|
Example, company tax profit £100,000 |
||
|
Split of profit |
Rate % |
Corporation Tax |
|
£50,000 |
19.0% |
£9,500 |
|
£50,000 |
26.5% |
£13,250 |
|
Total corporation tax payable |
£22,750 |
|
The above results in an effective corporation tax rate of 22.75% as opposed to the current rate of 19%. Therefore, the additional company corporation tax payable is £3,750.
As used to be the case some years ago, the company profit thresholds shown above are divided by the number of associated companies. The rules surrounding associated companies can get very complicated. However, in simplistic terms, associated companies are ‘companies under common control’.
Where associated companies exist the £50,000 and £250,000 profit thresholds are apportioned. This can result in the 25% rate of corporation tax being payable on proportionately lower company profits.
Be warned – having associated companies can significantly increase the overall corporation tax payable.
Contact us to see how we can help: jason@doctorstax.co.uk