Corporation Tax Increase, how will it affect you?

1,708,988 Corporate Building Stock Photos, Pictures & Royalty-Free Images - iStockAll Businesses must know what the Corporation Tax rates are. Knowing the rates will help them understand what amounts they will need to pay each Tax year, and how these changes will affect their businesses.  

Who will the increase in Corporation Tax affect?

 Companies and non-ring fencing businesses that pay Corporation Tax are more likely to be affected by this increase.

What rates will each Corporation have to pay?

 This new measure sets the base rate for all non-ring fenced Corporations to 19% for the financial year beginning in April 2022, a Corporate Tax rate of 25% for the financial year starting in April 2023. This increase comes with new requirements. For instance, the 25% Tax rate applies to Non-ring fenced Corporations that make £250,000 or more in profits during a financial year. A small profits rate of 19% is being put forward. Companies that make £50,000 or less in profits during a financial year are eligible for small profits rates. Companies that make between £50,000 and £250,000 in profits will pay the base Tax rate of 19%. There will be a one-off payment of £50 Mill as companies familiarise themselves with the new Tax amount and discover what Tax bracket they should be.  

The objective for the increase in Corporation Tax.

 The objective behind the increase is to build revenue for the government and help keep the rates relative to the amounts that different Corporations earn and exclude Corporations that are the least profitable.

Rules and Requirements 

 The small profits rate will not apply to close investment-holding companies. Marginal relief provisions are for if a company’s profits are between £250,000 and £50,000. Companies earning between these amounts of profits will be able to claim an amount of marginal relief. This connects the gap between the lowest and the highest amount providing a gradual increase in the Corporation Tax rate.

The believed Impact 

Its believed to have a significant impact on the economy. All business owners will need to know of the changes due to be made. Even though they don’t currently have a Corporation Tax liability.

So the conclusion is the increases in Corporation Tax will most likely affect what your business will be paying in Tax. 

CONTACT US today to find out more or if you have any questions.

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