Increase in Corporation Tax Rates - January 19th 2023

A 25% rate of corporation tax applies to all of a company’s profits if they exceed £250,000 from 1 April 2023. The 19% rate will continue to apply where profits are below £50,000.

There will no longer be a single corporation tax rate of 19% for non-ring-fenced company profits. (Ring fenced companies are those that make profits from oil rights and oil extraction).

Companies with profits between £50,000 and £250,000 pay the main rate of 25%, reduced by marginal relief.  This will be via a gradual increase in the effective rate rate of tax between £50,000 and £250,000.

Even though the tax rate for profits over £250,000 is 25% and the rate for profits below £50,000 is 19%, the effective tax rate for profits between £50,000 and £250,000 is 26.5%.  Consequently it is not tax efficient to have profits between £50,000 and £250,000. HMRC has an online calculator to calculate the tax due where marginal relief is available. 

Please contact us to discuss how to manage this increase.  We can offer advice around profits, income, discretionary expenditure and capital gains to ensure the lowest rate of tax payable is paid.