A rise in the main Corporation Tax rate is coming – what does that mean for you?

This year was always set to be about recovery, as the government seeks to repair the damage to the economy caused by the pandemic.

Leading up to the Budget, there was feverish speculation about how the Chancellor would begin this process and boost the UK’s depleted finances – would he raise income taxes being (unsurprisingly) one of the main topics.

We now know he didn’t, of course, but what he did do, is increase the main Corporation Tax (CT) rate from 19% to 25% on profits over £250,000, deferred until 1 April 2023. For profits under £50,000, the rate will remain fixed at 19%. If a company’s profits fall between £50,000 and £250,000, the tax rate on the profits will be someone between 19% and 25%.

In March, the Chancellor was keen to stress that the main CT rate of 25% is competitive, in comparison to other countries in the G7, especially with the US now proposing to increase its CT rate from 21% to 28%.   However, it can also be pointed out that the tax regime in the Republic of Ireland has the main rate of CT of 12.5% –half of the UK will be in less than two years!

Never clear cut, of course…

This is only the bones of the story, though, as both the upper and lower CT limits will be proportionally reduced for short accounting periods; also, close investment holding companies will not be eligible to enjoy the lower rates.

Upper and lower rates and a high marginal rate? Surely this has the potential to make forecasting tax payments more layered and complex? It may be two years’ away, but we know how time flies and now is when to think about if and how the future increase to the main CT rate could impact on both your returns and projections for cashflow.

Plan ahead with the help of the experts at Figurit. We have the knowledge and experience to support you in the years to come and will help you to explore all the opportunities available, to maximise profits and tax-saving opportunities and to grow your business.

Call Figurit (formerly known as Lansdell & Rose) on 020 7376 933 or complete the form below.

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