Corporation Tax has increased from the 19% we have already to 25% in April 2023. This was announced in March 2021 and affects any business with profits that exceed £250,000 per tax year ...
This may seem odd, but this ensures those with profits over £250,000 are taxed at 25%. This is illustrated below:
- The first £50,000 is taxed at 19% which gives a tax liability of £9,500
- The next £200,000 is taxed at 26.5% giving a tax liability of £53,000
- Therefore, the total tax charged on the first £250,000 profits is £62,500 which is a tax rate of 25% overall
The question of associated company rules is being asked again and I anticipate that there will be anti-tax avoidance legislation including associated companies' rules. These rules will be required to avoid say a £300k profit company, splitting up into 6 companies and declaring £50k profit at the lower tax rate.
So, after the leadership shenanigans of the Conservative party where the Corporation Tax increase was scrapped in Liz Truss' mini-budget in September 2022, the increase has now gone ahead and business owners need to understand how it will affect the.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.