On April 1, 2023, there will be significant changes to corporation tax in the UK.
These changes will affect businesses of all sizes, from small startups to large
corporations. In this blog, we’ll take a closer look at what the changes are, why they
are happening, and what they mean for businesses.
What is Corporation Tax?
Before we dive into the changes, let’s start by defining what corporation tax is.
Corporation tax is a tax on the profits of companies operating in the UK. It’s payable
by all companies, regardless of their size or whether they are based in the UK or
overseas. The current rate of corporation tax in the UK is 19%, which has been the
rate since April 2017.
What are the changes?
Introducing the new changes to Corporation Tax from 1 April 2023 – big news for
businesses across the UK. The main rate for non-ring-fenced profits will be
increased to 25%, affecting companies with profits over £250,000. But fear not, as a
Small Profits Rate (SPR) will also be introduced, allowing companies with profits of
£50,000 or less to continue paying Corporation Tax at the current rate of 19%.
For companies with profits between £50,000 and £250,000, a marginal relief will be
provided, resulting in a gradual increase in the effective Corporation Tax rate. This
measure will allow companies to ease into the increased rate and help mitigate the
impact on their finances.
The changes aim to create a fairer tax system and help to pay for the costs of the
COVID-19 pandemic. The government recognizes the importance of supporting
small businesses and has implemented measures to ensure they are not unfairly
impacted by the changes.
Overall, these changes are set to have a significant impact on businesses across the
UK. It’s important for companies to understand how the changes will affect them and
to prepare accordingly. The introduction of the Small Profits Rate will provide some
relief for smaller businesses, while larger companies will need to adjust their
finances to accommodate the increased rate. Let’s prepare for the future and
navigate these changes together.