From 1 April 2023, the top rate of Corporation Tax (CT) will rise from 19% to 25%, affecting all profitable limited companies from trading income and the sale of investments or assets.
Small companies with profits of up to £50,000 will continue to pay CT at 19%, thanks to the small profits rate, while companies with profits of £250,000 and over will pay CT at 25%.
Companies between these thresholds will pay CT at the top rate of 25% but benefit from marginal rate relief that reduces their effective rate of tax on a sliding scale, depending on their level of profitability.
All profits between £50,001 and £250,000 will be effectively taxed at a rate of 26.5%. Associated Companies for CT rules have also been reintroduced, and they will apply from 1 April 2023 in the context of the small companies’ rate of CT. This applies to clients who own or control more than one company, and the CT limits are divided by the number of companies concerned.
It is recommended that businesses plan for these changes and seek professional advice to mitigate their impact.
