As we edge ever closer to the new tax year, it’s always useful to remind yourself of the changes that will affect your company’s tax bill.
We understand if you’ve fallen behind the Government’s regular announcements over the last few months. With Downing Street’s tumultuous nature, it can be easy to get lost in the chaos.
So you may be asking yourself – what’s changing for corporation tax in April? Well, this handy guide will explain everything you can expect for the 2023/24 tax year.
New corporation tax rates
The most significant change to corporation tax is the increase of the main rate from 19% to 25%.
The current 19% corporation tax rate will apply to companies with annual profits of less than £50,000 (now known as the small profits rate).
Companies with annual profits of £250,000 will pay the full 25% rate, with anyone between the two paying 25% but with a marginal relief (more on this shortly).
Marginal relief
As mentioned, your company can claim marginal relief if you have profits between the two main thresholds.
HMRC will reduce your relief if your accounting period is shorter than 12 months, and associated companies will also see their relief cut further.
When operating more than one company, where one is controlled by the other, the £50,000 and £250,000 thresholds will drop. For example, where two associated companies exist, the threshold will reduce to £25,000 and £125,000.
There are rules around which companies cannot claim marginal relief. You won’t be eligible if you:
- run a non-UK resident company
- run a close investment holding company
- have a profit (including those of related companies) of over £250,000.
If you’re unsure whether you can qualify for marginal relief, the Government website has a free-to-use calculator to help you determine your eligibility. Failing that, we’re always happy to discuss your corporation tax with you.
Plan strategically
Although your tax bill could increase this year, there are steps you can take to lessen the impact of corporation tax.
The first port of call could be claiming any business expenses you incur throughout the year. Remember, though, they must be “wholly and exclusively” for business purposes.
Companies that invest in equipment to run their business can also be eligible for capital allowances. You can claim the 130% super-deduction if your company invests in qualifying plant and machinery equipment up until 31 March 2023.
The Government also provides the annual investment allowance which lets limited companies claim up to £1 million for any eligible purchases between 1 January 2019 and 31 March 2023.
Companies that look to make advancements in technology or science may also apply for research and development (R&D) tax credits.
When eligible, you can reclaim a proportion of your expenses (providing they are essential to the R&D project), which you can then use to lower your corporation tax bill.
We’re here to help
With all of the chopping and changing to corporation tax rates, it helps to have a guiding hand to help you through the jargon.
We work closely with a variety of limited companies, so we’ll happily discuss the upcoming changes with you.
Get in touch to discuss your corporation tax.
