Is UK Corporation Tax Increasing?

Editor’s note: Originally published on 23 March 2023; this article reflects information available at that time, and rules may since have changed.

How UK Corporation Tax rates work

The UK moved away from a single Corporation Tax rate for all profits in April 2023. The rate that applies can depend on the company’s level of taxable profit, whether marginal relief is available and whether the company has associated companies.

Companies with lower profits

A small-profits rate may apply where taxable profits remain below the relevant lower limit. A company’s accounting period and any associated companies can affect the calculation, so the headline threshold should not be used in isolation.

Companies with higher profits

The main Corporation Tax rate generally applies once profits exceed the upper limit. Between the lower and upper limits, marginal relief can produce an effective rate that rises gradually.

What if the owners control more than one company?

The profit limits are normally divided by the number of associated companies. This can cause the main rate or marginal-relief rules to apply at lower profit levels than a director expects.

Corporation Tax is calculated on taxable profit, not simply on turnover or money in the bank. Allowable expenses, capital allowances, losses and other adjustments may all affect the final figure.

Official source: HMRC Corporation Tax rates and allowances.

For a calculation based on your company’s circumstances, contact Leon Advisers at info@leonadvisers.com.