A rise in the main corporation tax rate is coming
Michael Lansdell explains why you should plan for the future increase to the main corporation tax rate now.
This year was always set to be about recovery, as the government seeks to repair the damage to the economy caused by the pandemic.
Leading up to the budget, there was feverish speculation about how the chancellor would begin this process and boost the UK’s depleted finances – whether he would raise income taxes being (unsurprisingly) one of the main topics.
We now know he didn’t, of course, but what he did do is increase the main corporation tax (CT) rate from 19 per cent to 25 per cent on profits over £250k, deferred until April 1, 2023. For profits under £50k, the rate will remain fixed at 19 per cent. If a company’s profits fall between £50k and £250k, the tax rate on the profits will be somewhere between 19 per cent and 25 per cent.
In March, the chancellor was keen to stress that the main CT rate of 25 per cent is competitive, in comparison to other countries in the G7, especially with the US now proposing to increase its CT rate from 21 per cent to 28 per cent. However, it can also be pointed out that the tax regime in the Republic of Ireland has the main rate of CT of 12.5 per cent – half of what the UK’s will be in less than two years!
Never clear cut, of course…
This is only the bones of the story, though, as both the upper and lower CT limits will be proportionally reduced for short accounting periods; also, close investment holding companies will not be eligible to enjoy the lower rates.
Upper and lower rates and a high marginal rate? Surely this has the potential to make forecasting tax payments more layered and complex? It may be two years away, but we know how time flies and now is the time to think about if and how the future increase to the main CT rate could impact on both your returns and projections for cashflow.
Plan ahead with the help of the experts at Figurit. We have the knowledge and experience to support you in the years to come and will help you to explore all the opportunities available, to maximise profits and tax-saving opportunities and to grow your business.
For more information call Figurit (formerly known as Lansdell & Rose) on 020 7376 933.