25% Corporation Tax from April 2023

The planned increases in Corporation Tax (CT) rates from April 2023 are now proceeding as originally announced.

The Corporation Tax main rate will increase to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will also be introduced from the same date for companies with profits of up to £50,000 ensuring these companies pay Corporation Tax at the same rate as currently.

Where a company has profits between £50,000 and £250,000 a marginal rate of Corporation Tax will apply that bridges the gap between the lower and upper limits. The lower and upper limits will be proportionately reduced for short accounting periods of less than 12 months and where there are associated companies.

The effect of marginal relief is that the effective rate of Corporation Tax gradually increases from 19% where profits exceed £50,000 to 25% where profits are more than £250,000.

The amount of Corporation Tax to pay will be found by multiplying your profits by the main rate of 25% and deducting marginal relief. For the fiscal year 2023, the marginal relief fraction will be 3/200.

For some businesses, it may be prudent to reconsider associated company relationships before April 2023 to avoid partial loss of the lower 19% rate or marginal tapering relief.