CORPORATION TAX RISING TO 25% April 2023
CORPORATION TAX INCREASE TO 25% April 2023.
If you pay Corporation tax you will probably be aware that the rates will be increasing as of April 2023. If not, sorry to be the bearer of bad news!
The existing 19% Corporation Tax rate is across the board currently, so that all profits are charged at that rate.
However from 1 April 2023, the Corporation Tax main rate for non-ring fenced profits will be increased to 25% for incorporated businesses with profits over £250,000. So all businesses who currently pay CT.
If your profits are £50,000 or under you will qualify for the ‘small profits rate (SPR) of 19%.
What if you fall between profits of £50,000 and £250,000?
Companies with profits between £50,000 and £250,000 will pay tax at the main rate ‘reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate’.
Do you have associated companies in your name?
In addition to this increase, there are implications for people or groups who also run associated companies or companies controlled by another.
The companies will no longer ‘stand alone’ in terms of their Corporation Tax liability. The financial limits will be divided by the number of said associated companies.
So for example, if you have a two associated businesses the lower level for small profits rate will be halved. So it would be £25,000 per business, not £50,000.
If one of them had profits of £5,000 and one had £40,000, instead of paying the lower rate on both of 19% as before, now, the scaled up rates will start applying at £25,000 threshold.
If you had five businesses, which were associated, the lower limit under which you’d pay 19% would be at a £10,000 threshold rather than the rate for one business of £50,000.
If indeed your combined profits for all five were £50,000 or just below you would start paying the scaled up rate from £10,000 for each of them.
This therefore might suggest that for some people, a discussion about restructuring might be in order.
PLEASE GET IN TOUCH ASAP TO TALK THIS THROUGH.
We wanted to explain the situation but you’re not alone here. Don’t worry yourself about this but please DO get in touch with us asap so we can go through your individual situation to make sure that you have the best organisational structure in place for your needs for when this kicks in next April 2023.
Please call David on 01763 257882 or email David@theaccountancypractice.com