Change is on the horizon for Corporation Tax

Change is on the horizon for Corporation Tax

The rate at which Corporation Tax is charged is set to increase from the 1st of April 2023, as one of several measures being introduced to help the country recover following the COVID-19 pandemic.


What is the current rate of Corporation Tax? 

As of July 2022, Corporation Tax is paid on company profits at a standard 19% no matter the turnover or profit of the business.


How is the Corporation Tax rate changing?

From the 1st of April 2023, businesses will be required to pay Corporation Tax at the following rates:

For companies whose taxable profits exceed £250,000, the rate will increase to 25%.

For companies with taxable profits of less than £50,000, the current rate of 19% will still apply.

Companies with taxable profits between £50,000 and £250,000 will pay tax at the 25% rate reduced by a marginal relief, meaning businesses will pay tax on a sliding scale between 19% and 25%.


Who must pay Corporation Tax?

Corporation tax is paid by businesses in the UK and is calculated based on their annual profits.

Businesses are required to pay Corporation Tax on profits from business activities if they are a UK limited company or an organisation such as members clubs, societies and associations, trade associations, housing associations or groups of individuals carrying out a business (such as cooperatives).


What is the deadline for Corporation Tax?

A Corporation Tax return must be submitted between the date of your company year-end and your statutory filing date.

The statutory filing date is either 12 months after the year-end or three months after you receive a notice to deliver a return from HMRC – whichever is the latest.

For companies which have made a taxable profit of anything up to £1.5m, Corporation Tax must be paid within 9 months and 1 day after the end of your accounting year.

If your business has a taxable profit of more than £1.5m, the corporation must be paid in instalments.


What actions should I take to mitigate your tax?

We highly encourage business owners to review their results prior to their year-end to ensure any planning considerations can be undertaken before it is too late.

For more information about the changes to Corporation Tax and how this will affect you and your business, contact our tax specialists by emailing mail@dhco.co.uk.

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