The April 2023 Corporation Tax Rate increases – explained

One of the major announcements from the 2021 March Budget was that Corporation Tax would be increasing from 19% to 25% in April 2023. So what does this mean for Limited Companies?

In this blog we take a look at what Corporation tax is, the changes that are being made, and how Aardvark can help you.

What is Corporation Tax?

It’s effectively a levy on your company’s profits, so a taxable charge on any profits left in your company once expenses (including your salary) have been deducted from your company’s total annual turnover. So for example, if your company’s turnover was £120,000 and your business expenses came to £60,000, you’d pay Corporation Tax on the remaining £60,000. The current rate of Corporation Tax is 19%.

When do you have to pay Corporation Tax?

Your company’s Corporation Tax payment is due nine months and one day from your company’s yearend. You must also file a CT600 tax return each year, 12 months from your company’s yearend. Failure to comply could result in you facing penalties and a possible Corporation Tax increase, so be sure to have the support from an expert contractor accountant so you don’t miss any deadlines!

What are the changes coming into play next April?

Corporation Tax will be increasing from the current 19% to 25%, with a tapered relief for those whose company profits are between £50,000 and £250,000. If your company’s profits are below £50,000 you’ll be subject to the new ‘smaller profits rate’ of 19%.

Why is the government bringing in the increase?

During the Covid-19 pandemic the government provided UK businesses with an astonishing £100 billion in financial support, and the new rise in Corporation Tax is the government’s plan to recuperate that money, and effectively plough it back into the UK’s economy.

How will Limited Company contractors be affected?

If your Limited Company’s profits remain below £50,000 you’ll remain unaffected, and will continue to pay 19% Corporation Tax. But if your company’s profits fall between £50,001 – £250,000 you can expect to pay the new tapered relief of Corporation Tax, with 25% the highest amount you’d be liable to pay.

How can Aardvark Accounting help?

Tax is tricky, and it takes an expert to understand what’s due and when, without paying a penny more than necessary to the taxman! That’s where our expert Aardvark accountants come in, to ensure your Limited Company’s accounting and tax is being taken care of, so you don’t need to stress about the numbers. With a great value accounting service, handy technology and a direct line to your dedicated personal accountant, we only look after contractors and we love it, and won’t rip you off in the process. So take a look at our packages today, or get in touch.