Background Information on UK Corporation Tax Change
In October 2022, the UK Government proposed changes to the UK Corporation Tax rate from 1 April 2025. The proposal is aimed at increasing the main rate from 19% to 25%. In the same time, the Government is seeking to protect the small and medium sized enterprises from the hike, the standard small profits rate is re-enforced so small businesses with small profits pay the Corporation Tax rate a lower rate.
Current Corporation Rate effective from 1st April 2023 onwards
The Corporation Tax charge and main rate for Financial Year 2022 that covered the period was from 1 April 2022 to 31 March 2023.Effectively from 1 April 2023, the Corporation Tax charge, main rate and small profits rate for Financial Year 2023 will go up from 19% to 25%.
On the other hand, for small businesses with a profit less than GBP 50,000, the Corporation Tax rate will continue to be charged at 19%. For businesses with a profit over GBP50,000 but less than GBP 250,000 , the Taxman is calculating the Corporation Tax rate 25% with a marginal tax relief calculation , the details of which are the following:
Applicable Profit Bands for Corporation Tax rate
GBP0 to GBP50,000 19%
GBP50,000 to GBP249,999 26.5%
Over GBP 250,000 25%
Who can claim Marginal Relief
companies may be able to claim Marginal Relief if its taxable profits from 1 April 2023 are between:
GBP50,000 (the lower limit)
GBP 250,000 (the upper limit)
Who cannot claim Marginal Relief
Companies cannot claim Marginal Relief with any of the the following conditions:
A non-UK resident company
A close investment holding company
your company profits (including distributions from unrelated, unassociated companies) go over £250,000
This article should not be construed as legal advice and is not intended to be relied upon in relation to any tax or legal advice. The information we provide does not address your particular requirements and are for informational purposes only. It does not constitute any form of legal advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances and is not intended to be relied upon by you in making any decisions that may arise from reliance on materials contained on our website.