Corporation Tax

Corporation tax is paid by UK limited companies and some other organisations. It is based on the annual profits that a company makes.

Corporation tax specifically applies to the following for a limited company:

• Trading profits – earnings generated from doing business
• Investments
• Selling assets such as land, property, shares, and machinery for a chargeable gain

Corporation tax has to be paid by all UK limited companies. There are, however, other organisations that may need to pay corporation tax despite not being incorporated as limited companies. These include:

• Housing associations
• Membership organisations
• Clubs and societies
• Co-operatives

The corporation tax main rate in the UK is set at 19% for all business profits. Following the pandemic, the government announced in the Budget 2021 that from April 2023, if your taxable profits are above £250,000 then you will be subject to an upper limit of 25%. If your profits are £50,000 or less then you’ll be subject to a lower limit rate of 19%. If your profits are in between the lower and upper limits then you’ll pay a marginal rate of effectively 26.5% but will have the benefit of marginal relief. The government also announced the introduction of the new Super-deduction. Basically, the government are encouraging businesses to invest in assets to help the country’s recovery. From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

• a 130% super-deduction capital allowance on qualifying plant and machinery investments
• a 50% first-year allowance for qualifying special rate assets

The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.

For many companies, not only does Corporation Tax represent a significant part of their trading costs, but also ensuring it’s calculated correctly, all allowances are claimed for paid on time and the related documents filed can consume considerable amounts of time.

We offer a range of services that can help relieve some of the burdens Corporation Tax presents to you and your staff, plus identify the most tax effective structure for your business, making sure that you take full advantage of opportunities and reliefs.