2023 Corporation Tax Rate Increase

Corporation tax rates will be increasing from April 2023, from 19% to 25%, seeing the return of the small profit rate and main rate of corporation tax.

What is the Small Profits Rate?

Businesses with profits of £50,000 or below will be protected and still only have to pay 19% under the Small Profit Rate. This means that 70% of businesses will be completely unaffected. 

What is the Main Rate?

A taper above £50,000 will be introduced so businesses only start paying the full 25% rate on profits from £250,000. Only 10% of companies will have to pay the full rate.

Marginal Relief

Those earning profits between £50,000 – £250,000 will be able to claim marginal relief, which will provide a gradual increase in corporation tax rate between the small profits and main rate.

If your organisation’s taxable profits before the 1st April 2015 are between £300,000 and £1.5 million, you might be able to claim Marginal Relief and pay less corporation tax. If your company has one or more associated companies, these limits are divided by the total number of associated companies.

What is an associated company? 

A company is an associated company of another if one of the companies has control of the other, or both are controlled by the same companies or people.

For example, if one company owns 3 others, then the threshold will be divided by 4. The lower limit will become £75,000 and the upper limit will be £375,000.

What is considered ‘control’?

A person has control of a company if they exercise or are entitled to acquire direct or indirect control over the company’s affairs. This includes possession or entitlement to the greater part of voting power, share capital, distributed income or assets when winding up a company. 

What is the increase for Group Companies?

The lower and upper limits will be proportionately reduced for short accounting periods and where there are associated companies. 

The related 51% group company test at s279F to s269H CTA 2010 will be replaced by associated company rules. 

Thresholds that apply for determining whether or not a company is chargeable at the small ring fence profits rate at s279E Corporation Tax Act 2010 will be aligned with these limits.

How much relief can you claim?

You can calculate how much relief you may be entitled to by using the Marginal Relief tool, for corporation tax profits up to the 1st April 2015.

You cannot use this tool if your company gets its income from oil extraction or rights.

How do you claim Marginal Relief?

You can either provide details in your online Company Tax Return, or amend it within 12 months of the filing date.

Even after these changes the UK will have the lowest corporation tax rate in the G7, lower than the US, Canada, Italy, Japan, Germany and France.

Remember, if you have any questions or need assistance, we’re here to help!

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