Changes to Corporation Tax
The rate of Corporation Tax has gone up and down a fair bit over the years and, at some points last year, it became a little confusing as to what companies would actually end up paying. However, it’s clearer now – for the time being at least.
Along with a list of other tax changes which came into play in April 2023, there has been a rise in Corporation Tax for businesses making profits in excess of £50,000. The new level is 19% up to a maximum 25% for businesses making profits in excess of £250,000.
This new regime sees the tax charged gradually increasing from 19% to 25%, depending on your company’s profit, so it really will make a difference how much profit you make. To navigate these changes, you will need the support of a good accountant even more than ever and, here at Lewis & Co, we are ready to help you.
Corporation Tax is charged on profits, minus costs. Bearing this in mind, we can support you with ‘profit planning’, which could involve you, as a director or shareholder, taking salary and pension contributions, for example. These are a deduction from your company’s profit, while dividends are not.
It’s worth bearing in mind that the Government will also allow businesses to subtract money invested in items such as IT equipment and machinery from the profits they pay Corporation Tax on, for the next three years.
Corporation Tax first came onto the scene as part of the Finance Act 1965, which replaced the system of income tax and profits tax with Corporation Tax. Until then, companies were taxed at the same income tax rates as individual taxpayers, with additional profits tax levied on companies.
Today, Corporation Tax is paid to the Government by UK companies and foreign companies with UK offices. In addition to limited companies, other organisations may also be required to pay it, such as housing associations, co-operatives, trade associations, and members clubs, societies and associations. Sole traders or partnerships are not required to pay Corporation Tax – so if you’re thinking about moving over to being a limited company, you might now want to give that decision more thought.
If you’d like to talk to us further about Corporation Tax, then do get in touch: tel: 01892 513515 or email: firstname.lastname@example.org