The United Kingdom’s corporate tax framework changed, effective April 2023, and this may have implications for your business.

Corporation tax applies to Limited companies, which is a responsibility triggered by profitable financial years. It is essential to note that companies operating at a break-even point or incurring losses may find exemptions, with provisions for carrying losses forward or backward.

Revision in Main Corporation Tax Rate

Commencing April 2023, the main corporation tax rate has been revised from 19% to 25%. This adjustment specifically impacts companies reporting profits exceeding £50,000.

Small Profits Rate and Marginal Relief

Small Profits Rate Companies reporting profits of £50,000 or less continue to benefit from the 19% Small Profits Rate, creating a favourable environment for smaller entities.

Marginal Relief Mechanics For entities reporting profits ranging between £50,000 and £250,000, the introduction of marginal relief aims to alleviate the tax burden. This involves a calculated approach, multiplying the marginal relief fraction by the difference between the upper profit limit and the actual profits.

Tax Computation Complexity

The first year of marginal relief application introduces computational intricacies. Companies must work out the number of days falling before and after April 1, 2023. Profits accrued before this date retain the 19% tax rate, transitioning to the 25% main corporation tax rate for profits exceeding £50,000 for the entire accounting period post-April 1, 2023.

Should you require support or wish to discuss the implications for your specific business circumstances, please do not hesitate to contact our team. We are here to assist you in navigating these changes seamlessly.