The 25% Corporate Tax Rate.. What You Need to Know

Are you aware that the UK’s corporation tax rates will undergo changes in April of next year?

Starting April 1st, 2023, the current 19% corporation tax rate will shift to a variable rate between 19% and 25%, depending on your business’s profits. This change could potentially impact your tax liabilities for the 2023/24 tax year.

The upcoming changes will introduce a new tapered rate system for profits falling between a lower and upper threshold. Companies with profits below the lower threshold will continue to be charged at 19%, while companies with profits exceeding the upper threshold will be charged at 25%. For profits in between the two thresholds, the tax rate will be calculated using a marginal relief formula.

The lower threshold is calculated as £50,000 divided by the number of associated companies, and the upper threshold is £250,000 divided by the number of associates. If the upper threshold is not exceeded, marginal relief will be applied, which will increase the average tax rate from 19% to 25% as profits rise.

To ensure you are prepared for these changes, it’s recommended that you speak with your advisers to discuss your planning options. Our team can help you establish the number of associated companies to consider and calculate the tax due after marginal relief. We can also advise on options to reduce your overall tax charge if you have associated companies with significantly different profit profiles. Don’t hesitate to get in touch to discuss your tax planning needs.