Vantage’s top tips on the Corporation Tax Rate increase – what’s happening, when and how you could be affected

Vantage’s top tips on the Corporation Tax Rate increase – what’s happening, when and how you could be affected

By Published On: 8 February 2023Categories: Budget, Limited Company, News, Small Business Owner, TaxTags:

The increase in Corporation Tax in April 2023 was announced back in the March 2021 Budget, but what does this mean for small business owners? In this blog we explore what’s going to change, what you need to be aware of, and how to prepare.

First things first – what is Corporation Tax?

Corporation Tax is a levy on your company’s profits, which is essentially a charge on the profits left in your company once expenses such as your salary, have been deducted from your company’s turnover.

For example – If your company’s turnover was £150,000 and your business expenses came to £80,000, you’d have to pay Corporation Tax on the remaining £70,000. At present the rate of Corporation Tax is 19%.

When do you need to pay Corporation Tax?

Corporation Tax payments must be made nine months and one day from your company’s yearend. You’re also required to complete and file a CT600 tax return annually, 12 months from your company’s yearend date. Failure to comply with these dates will result in fines from HMRC, and a possible increase in your Corporation Tax bill.

What’s changing in April 2023?

Corporation Tax will be increasing from 19% to 25% from April 2023, with a tapered relief for those Limited Companies whose profits fall between £50,000 and £250,000. Should your company profits fall below £50,000 you’ll be subject to the new ‘small profits rate’ of 19%.

Why is it increasing?

Corporation Tax has been 19% for a long time, and with the added pressure the financial support provided to businesses during the Covid-19 pandemic, the then Chancellor of the Exchequer, Rishi Sunak decided an increase would help to recoup some of the money spent. The government is keen for UK businesses to ‘give back’, and to aid in the UK’s economic recovery.

How will this affect Limited Company businesses?

If your company’s profits remain below the £50,000 threshold you’ll remain unaffected, but if they increase between £50,001 – £250,000 you’ll be subject to the new tapered relief of tax, reaching up to a maximum of 25% that you can expect to pay.

How can Vantage Accounting help?

Tax is tough and with the government constantly moving the goal posts it can feel near impossible to run a business and keep on top of your tax affairs. That’s why it’s a good idea to enlist the services of a small business accounting expert who can keep you up to date with what will affect you, your money and your business. Here at Vantage our team of expert accountants do just that, ensuring our clients’ personal and professional needs are taken care of, no matter what changes are on the horizon. Get in touch today to find out more and speak to a member of our team today.

Note: All the information and advice in this blog post was correct at the time of writing.

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