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Rising Corporation Tax receipts and their implications for business owners

HM Revenue and Customs (HMRC) has announced a notable surge in Corporation Tax receipts for the financial year 2022/23. The total has climbed by £17.3 billion, hitting an unprecedented £84.7 billion. This marks a 26 per cent increase compared to the last tax year. Notably, this uptick happened before the planned rise in the top rate of Corporation Tax and the introduction of marginal tax relief, suggesting that even higher receipts could be on the horizon.

Impact on cash flow

One immediate consequence of the increased tax receipts is the potential strain on business cash flow. Elevated tax obligations mean companies will have fewer funds for other operational activities like expansion, recruitment, and research and development.

Influence on investment choices

The rise in Corporation Tax could also have a ripple effect on investment strategies. Given the diminished cash flow, companies may exercise greater caution when considering substantial investments in new ventures or technologies, possibly hindering long-term innovation and growth.

Challenges for SMEs

Small and medium-sized businesses (SMEs), which often function on narrow profit margins, could feel the pinch more acutely due to the higher corporation tax. The extra financial load may result in staff cutbacks, reduced working hours, or even business closures in extreme scenarios.

National implications of increased tax revenue

The record-breaking £84.7 billion in Corporation Tax receipts is a mixed blessing. While it signals a strong economy and gives the Government with extra funds, it also creates hurdles for the business community. How the Government allocates this additional revenue remains to be seen, but business owners should brace themselves for potential increases in their tax obligations and take steps to maintain financial stability.

For further insights and advice on managing your Corporation Tax responsibilities, feel free to contact us.


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