How do changes in Corporation Tax affect my business?

Changes to the amount of Corporation Tax (CT) businesses pay came into effect on 1 April.

From that date, the main rate of CT rose from 19 per cent to 25 per cent for the most profitable companies.

Companies whose year-end is 31 March will pay 19 per cent CT for the whole of the 2022/23 period, and then 25 per cent for the whole of the 2023/24 period.

Hybrid rate

However, for companies whose accounting period straddles 1 April, it will be necessary to apportion profits between those that arose up to 31 March and those that arose after 1 April.

Generally, the effective amount of Corporation Tax due will, however, rely on the taxable profits your company makes as follows:

Where companies have taxable profits between these two thresholds it is more complex as the rate of tax they pay will depend on their level of profit.

This is due to Marginal Rate Relief (MRR). This is a tapered relief, which increases in line with a company’s profits.

The basic method used by HM Revenue & Customs (HMRC) to calculate this relief is quite complex, so seek advice from your professional adviser.

Need advice on the rise in Corporation Tax and related matters? Contact us.