The Accountants for Growth

Rises in CT rates

Rises in CT rates
Start Planning now to avoid the hike in Corporation Tax

Learn about the increases in Corporation tax that all businesses are facing over the coming years The Government have recently announced that Corporation tax rates will rise as they look to recover money spent in giving business and individual support during the pandemic. In this blog, we will explain how the rises will impact on businesses and share a few thoughts about how to plan to minimise the rate rise impact.
The Government have announced that with effect from 1 April 2023 there will be significant increases in the rate of corporation for all but the smallest of companies (those with profits less than £50k where the rate will remain at 19%).
For companies with annual profits of over £250,000 then from 1 April 2023, the rate will rise to 25% and for companies where the profits fall between £50,000 and £250,000, they will be able to claim marginal relief; this is a system that we have not had to worry about for over 10 years.
You need to be particularly mindful if you look after a group of companies or have companies with common ownership as those profit bands of £50,000 and £250,000 are proportionately reduced where there are associated companies. For example, if you have two trading companies in a Group, then the small company band for each company would only be £25,000.
So what can we do to mitigate this rise?
As we lead up to the date when the increase comes into play, we could consider the following options: -
  • Look to carry trading losses forward rather than carry them back or use them against 'other income' in the year that they occur. In this way, we may bring our taxable profits in 2023/24 down under the thresholds and therefore subject to a lower rate of corporation tax.
  • Keep our powder dry in terms of company pension contributions or purchases of plant & equipment for which we can claim capital allowances. So long as we are not impacting detrimentally on the business, we could consider delaying such expenditure until 2023-24.
  • Use the capital allowances super deduction to create taxable losses that we can carry forward and utilise in 2023-24.
  • Build up cash reserves now so that we are not caught short with the increased tax liabilities come into play.

Good planning it crucial to the successful running of any company so we should sit down now, consider what our levels of profits will look like in 2023-24 and plan accordingly.
We can help you by helping with that planning process; preparing financial forecasts, looking at capital equipment purchases and other forms of relief with you. Please get in touch if you would like support in this area and, if you have found this blog helpful, please share this information on social media - that would be appreciated
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