We take a look at the main tax changes that come into effect on 1 April 2023 for companies and outline what action can be taken to ensure companies are being tax efficient given the changes that are coming into effect.
Corporation Tax Rate change from 1 April 2023
The UK’s main rate of corporation tax will increase to 25% (from the current 19% rate) with effect from 1 April 2023 for companies with annual chargeable profits of more than £250,000.
The 19% rate will be retained for companies making profits of £50,000 or less.
Companies with profits between £50,000 and £250,000 will pay tax at a hybrid rate depending on their profit level. In effect, there will be a 26.5% corporation tax rate on profits between £50,000 and £250,000.
For companies with year ends which straddle 1 April 2023, the period will be treated as two separate periods for the purposes of the corporation tax calculation.
The profit thresholds are divided by the number of associated companies. The definition of ‘associated company’ is to be widened (broadly speaking) to include companies that are under the control of the same person or persons where those companies are commercially interdependent, not just 51% group companies.
Capital allowances super deduction ending on 31 March 2023
Currently, companies which acquire certain plant and machinery can claim an enhanced 130% super-deduction of the cost for tax purposes. This relief will end on 31 March 2023. Any proceeds received from sale of an asset on which super-deduction has been claimed will be brought into tax in the period of sale.
Broadly speaking, qualifying assets include most plant and machinery other than second hand assets, cars and assets bought to lease to someone else. Companies considering purchases of qualifying plant and machinery should consider doing so before 1 April 2023 to take advantage of the super-deduction.
Contact Us
Please contact us to find out how the above applies in your circumstances and how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
