Increase in UK corporation tax rates

From 1st April 2023, UK corporation tax will increase to a rate of 25% and will be applied to all of a company’s profits if the company exceeds £250,000 in profits. If profits fall below £50,000, the 19% rate will continue to apply. The marginal rate that applies between those limits will be 26.5%. 

How associated companies are affected

The upper and lower limits are divided by the number of associated companies in the accounting period. This includes companies in the same 51% group and companies under common control, for example, where the same individual controls two standalone companies. 

An example: 

Joe Bloggs controls Bloggs Trading Ltd and Bloggs Lettings Ltd. 

The limits become £125,000 and £25,000. 

If Bloggs Trading Ltd has profits of £200,000 in the year ended 31st March 2024, then the 25% rate will apply to all of that company’s profits.

Transferring trades to a single operating company

In a group situation, you may wish to restructure the businesses by the transfer of trades to a single operating company. This would leave the other companies dormant as those companies would not usually be counted as associates. 

Need help with the new corporation tax rate?

Whether you are self-employed or own a small business, we can help with your accounts and taxes to reach your business goals. To speak to one of our experts, contact us here

Leave a comment