In the Budget at the beginning of March, Chancellor Rishi Sunak announced various changes for businesses including a change to Corporation Tax.
Here is what you need to know about the changes to UK Corporation Tax as a small business owner…
What is Corporation Tax?
Corporation Tax is a tax paid by UK businesses on all taxable profits, no matter where in the world the profit was generated. Corporation Tax is calculated and paid annually based on the company’s ‘Corporation Tax accounting period’ – this is usually the same as the company’s financial year.
The current rate of corporation tax in the UK is 19%.
What is going to change for UK businesses?
In the Budget, it was announced that UK Corporation Tax will increase from 19% to 25%, as the government tries to restore public finances following the Covid-19 pandemic. The current 19% rate of Corporation Tax will continue until 1st April 2023, after which it will increase to 25%.
Businesses with profits of £50,000 or less, will benefit from a Small Profits Rate (SPR) and will continue to be taxed at the current rate of 19% even after 1st April 2023. Rishi Sunak said “This means around 70% of companies (1.4 million businesses) will be completely unaffected.”
Those companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a tapered relief to provide a gradual increase in the effective Corporation Tax rate. Meaning that only businesses with profits of £250,000 or more will be taxed at the full 25% rate.
See the table below for the rates:
Corporation tax rates
If you have any questions about corporation tax, or anything to do with your business’ finances, please feel free to get in touch with us here at Magpie Accountancy.