Corporation Tax Changes

From 1st April 2023, Corporation Tax Rates are going to be changing.

Currently, the rate is 19% on all profits.

Following the changes, the rates will be as follows:

• Profits up to £50,000 will be taxed at 19%

• Profits over £250,000 will be taxed at 25%

• Profits between £50K and £250K will be taxed at 19% up to £50K and then at 26.5% between £50K and £250K

So if you generate less than £50K profit, the 19% will still apply, and if you generate more than £250K, the new rate of 25% will be applied over the full amount.

Here is a quick overview of the tax liability for various amounts of profit between £50K and £250K, as well as the difference between what you will pay and what you would have paid under the current tax rate:

Profit	Tax liability 2023	Previous tax (19%)	Difference
£60K	£12,150	£11,400	+ £750
£70K	£14,800	£13,300	+ £1,500
£80K	£17,450	£15,200	+ £2,250
£90K	£20,100	£17,100	+ £3,000
£100K	£22,750	£19,000	+ £3,750
£125K	£29,375	£23,750	+ £5,625
£150K	£36,000	£28,500	+ £8,500
£175K	£42,625	£33,250	+ £9,375
£200K	£49,250	£38,000	+ £11,250

Note that where your accounting period covers this date, profits up to the 31st of March will be calculated at 19% and from the 1st of April at the new rates.

Profits are considered to arise evenly over the whole accounting period.

This brings into sharper focus keeping profits below £50,000.

There are a couple of tax-efficient ways in which profits can be reduced, such as:

• Pension contributions up to £60,000 per individual

• Purchasing an electric car

Please don't hesitate to contact us if you have the same shareholdings in multiple companies.