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.