Corporation tax is a tax for businesses and is calculated based on the taxable profits achieved by the end of the company financial year.
What’s changing?
From 1 April 2023, the Corporation Tax main rate will increase from the previous flat rate of 19% to 25%. This new rate will apply to companies that earn profits of £250,000 or more. However, a Small Profits Rate of 19% will still be available for companies earning profits of £50,000 or less.
| Corporation tax rate – from 1 April 2023 | |
| Main rate | 25% |
| Small profits rate | 19% |
Companies with profits that fall in between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief – this provides a gradual increase in the effective corporation tax rate.
With this increase, it’s more important than ever to look at ways to minimise your tax bills.
One of the easiest methods to save tax is to put money into a pension scheme and HMRC have increased the annual allowance from £40,000 to £60,000 for the 2023/24 tax year. We would always recommend speaking to an Independent Financial Advisor to discuss your pension requirements.
We have a useful guide on our Knowledge Hub with a number of other tips.
Associated companies
The upper and lower profits limits mentioned above are proportionately reduced to take account of the number of associated companies that the company has.
As an example, if a company has one other associated company, the profit limits would be as follows:
- Upper limit would reduce from £250,000 to £125,000
- Lower limit would reduce from £50,000 to £25,000
Generally, a company is associated with another company if they are under common control. The rules around this can be complex but typically two companies are associated if they are owned or controlled by the same individuals.
If you are an inniAccounts client, please let your Account Manager know if you have any associated companies.
Corporation Tax Reporting
The computations are completed and reported to HMRC on a Corporation Tax Return called form CT600 once a year.
Corporation Tax Deadlines
Payment of Corporation Tax must be made to HMRC within 9 months of the company financial year end. While you have 12 months to file the CT600 form, this form will need to be prepared to calculate your company’s required payment. So it’s prudent to file it within the 9 months deadline.