Corporation Tax Rate increases in April 2023

Back in the March 2021 Budget it was announced that there would be an increase in Corporation Tax from April 2023, so how much will this ultimately cost you and your business?

In this blog we look at what’s to come and how you’ll be affected.

What is Corporation Tax?

In short it is a levy on your company’s profits, which is effectively a charge on the profit left in your company once expenses (including your salary) have been deducted from your company’s turnover. For example if your turnover was £150,000 and your business expenses came to £80,000 you’d pay Corporation Tax on the remaining £70,000. The current rate of Corporation Tax is 19%.

When is Corporation Tax due?

You must make your Corporation Tax payment within nine months and one day from your company’s yearend. You’ll also need to file a CT600 tax return each year, 12 months from your company’s yearend date. If you don’t adhere to the dates given by HMRC you can expect to receive a penalty from HMRC, or even an increase in your Corporation Tax bill.

What changes are being made?

It’s been confirmed that corporation tax will be rising from 19% to 25% from April 2023, with a tapered relief for those with whose company profits fall between £50,000 and £250,000. If your company’s profits are below £50,000 you’ll be subject to the new ‘small profits rate’ of 19%.

Why the increase?

Corporation Tax has been at a historically low rate of 19%, and as a result of the financial support provided to businesses during the Covid-19 pandemic at an eye-watering total of £100 billion, then Chancellor of the Exchequer Rishi Sunak decided that an increase in Corporation Tax was the way to recoup some of that money. The rise in tax is the government’s way of getting UK companies to ‘give back’, and to aid in the UK’s economical recovery.

How will this affect Limited Company contractors?

If your company’s profits remain below £50,000 you’ll remain unaffected, as you won’t have reached the threshold for the increase in Corporation Tax and will continue to pay 19%. But should your company earn profits of £50,001 – £250,000 you’ll be subject to the new tapered relief of tax, with 25% being the highest amount you can expect to pay.

How can SG Accounting help?

Tax can be confusing, and it’s easy to make mistakes, especially when it’s not your area of expertise. That’s why it’s always best to leave it to the experts, to ensure you’re paying the right amount of tax (and not a penny more!) and to stay on the right side of the taxman. Here at SG Accounting we do just that, by providing Limited Company contractors a truly all-inclusive expert accounting service, that’s continually evolving with the market. If this sounds like the type of support and service you deserve from your contractor accountant, get in touch with our team today.