Corporation Tax has been set at a flat rate of 19% for a few years now. From 01 April 2023, however, this has changed.
As outlined below, the changes revolve around business profits:
• Any profits up to £50,000 will be subject to Corporation Tax at 19%.
• Any profits above £250,000 will be subject to Corporation Tax at 25%.
• Any profits between £50,000 and £250,000 will be subject to a marginal rate, explained further below.
A marginal rate will apply for companies with profits between £50,000 and £250,000. The effect of this is that as total profits increase up to £250,000, the rate of corporation tax will do the same.
Effectively, this marginal rate is 26.5%. Whilst this may seem confusing at first, keep in mind that this will only apply to profits between £50,000 and £250,000 (i.e. it won’t be an ‘actual’ rate that the company pays, as illustrated in the below graph).
The end result is that as profit increases between these amounts, a greater proportion of profits are taxed at 26.5% rather than 19%, leading to the main rate of 25% being applied in full from the £250,000 profit mark onward.
As outlined below, the changes revolve around business profits:
• Any profits up to £50,000 will be subject to Corporation Tax at 19%.
• Any profits above £250,000 will be subject to Corporation Tax at 25%.
• Any profits between £50,000 and £250,000 will be subject to a marginal rate, explained further below.
A marginal rate will apply for companies with profits between £50,000 and £250,000. The effect of this is that as total profits increase up to £250,000, the rate of corporation tax will do the same.
Effectively, this marginal rate is 26.5%. Whilst this may seem confusing at first, keep in mind that this will only apply to profits between £50,000 and £250,000 (i.e. it won’t be an ‘actual’ rate that the company pays, as illustrated in the below graph).
The end result is that as profit increases between these amounts, a greater proportion of profits are taxed at 26.5% rather than 19%, leading to the main rate of 25% being applied in full from the £250,000 profit mark onward.
