Corporation Tax will increase to 25% for the financial year beginning April 1, 2023.
As announced during the Budget 2020, Corporation Tax remained the same at 19% for the financial years starting April 1, 2020 and 2021.
The increase in 2023 will apply to profits over £250,000.
A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%.
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.
This measure is expected to have a significant administrative impact on approximately 2 million businesses who will need to be aware of the changes even if they do not currently have a Corporation Tax liability.
“We were expecting this increase, especially due to government spending over the past 12 months,” said Nick Charnley, tax manager at Ellis & Co Chartered Accountants and Business Advisers.
“Companies should be planning for this now, potentially bringing forward sales of assets so that the profits are taxed at the lower rates.”
For further information on this or any other tax matter please contact Nick on 01244 343504.