TAX For Companies

New Corporation Tax Rates

November 8th 2023

By Wisteria

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In April this year, the government introduced big changes to the UK’s Corporation Tax rates, with new thresholds replacing the old single flat rate. The new rules mean that companies are now taxed according to their annual profits. So what exactly does this recent shake-up mean for UK businesses? In this article, we’ll take a closer look at the new legislation and explore its impact on small, medium and large companies across the country.

Does my company have to pay Corporation Tax?

Unlike sole traders or partnerships that pay income tax on any profits they generate, if you’re trading as a limited company, a club or cooperative, or if you’re an international business with an office here in the UK, you’ll be subject to Corporation Tax. That means you’ll have to pay tax on any net profits or any gains from the sale of assets (such as land, property or shares), in any given accounting period. To calculate your Corporation Tax, you’ll need to submit a CT600 form as part of your Company Tax Return.

When do I have to pay my Corporation Tax?

The deadline for settling your Corporation Tax bill is nine months and one day after the end of the accounting period it relates to. However, if your taxable profits for the year are more than £1.5 million, your business will be classed as a ‘large’ or ‘very large’ company and you’ll have to pay your Corporation Tax in instalments. This will include four equal payments beginning 7 months and 14 days after the first day of the accounting period in question.

What are the new Corporation Tax rates?

Until this year, a blanket rate of 19% Corporation Tax applied to all eligible companies, regardless of size, profit or turnover. Under the new rules, however, businesses will be charged according to their annual profits, with larger, more profitable companies shelling out substantially more than their less lucrative counterparts. Here are the new Corporation Tax rates, as of 1 April 2023:

• If your company makes more than £250,000 profit over the course of the financial year, you’ll have to pay the main rate of Corporation Tax at 25%.

• If you make a profit of £50,000 or less, you’ll be liable for the ‘small profits rate’, which is 19%.

• If your profits fall between £50,000 and £250,000, you may be entitled to ‘Marginal Relief’ – a gradual reduction of the main Corporation Tax rate, based on your overall profit.

• Different Corporation Tax rates apply for so-called ‘ring fence companies’ – organisations that make profits from oil extraction or oil rights.

What are associated companies and how do they affect Corporation Tax rates?

The new Corporation Tax regulations brought in this year have also seen the reintroduction of the ‘associated companies’ rule. Essentially, it means that if you own or control more than one company, you may have to group them together for Corporation Tax purposes, altering how and when you settle your tax bill and the rate of tax payable. According to HMRC, a company is associated with another if:

• One is under the control of the other.

• Both are under the control of the same person or persons.

It’s worth noting that a company can be classed as an associated company, even if it’s not resident here in the UK for tax purposes.

Speak to the experts

Working out your Corporation Tax liability for any given accounting period can be a complicated process. Here, at Wisteria, our experienced tax specialists can help you meet all the necessary compliance, save your company time and money, and ensure you’re not paying a penny more in tax than you need to. For more information about Corporation Tax or any other tax-related issues, please don’t hesitate to get in touch.

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