Corporation Tax Increase

Corporation Tax Increase

Corporation Tax Increase

UK Corporation Tax Increase in 2023- What You Need To Know

On 1st April 2023, the UK will be increasing its corporation tax rate from 19% to 25%. As a small business owner, this could have a significant impact on your finances. In this blog post, we will discuss what you need to know about this change and how it might affect your business.

What is Corporation Tax?

Corporation tax is a form of taxation paid by limited companies and organisations in the UK. It is applied to their profits and is usually based on their yearly financial performance. The current rate of corporation tax in the UK is 19%, but this will be increasing to 25% on 1st April 2023.


How Can This Affect Your Business?

The increase in corporation tax rates could have a major impact on your business’s finances if you are a limited company. It could mean that there are less profits available for reinvestment, which puts added pressure on other areas of your business such as marketing or research and development. It also means that your overall taxation bill will be higher, reducing the amount of money available for other activities such as paying staff wages or dividends for shareholders.

Who will the tax increase affect?

From 1st April 2023, Corporation Tax increases.  Corporation tax currently sits at 19% will increase to 25% from 1st April 2023.

There are a few things to note about the increase.

For businesses earning £50,000 a year or less in profit, the rate will stay at 19%.

For businesses earning over £250,000 a year or more in profit, the rate will move to 25%

For those businesses in between £50,000 and £250,000 profit, the rate will be tapered (gradually increase) 

This means that for many businesses there will not be a Corporation Tax increase at all. It also means that if your profits are in the region of £50,000 then there may be some additional tax planning to be done to make sure you are operating efficiently from a tax perspective. 

What Should You Do?

The key takeaway here is that you should start planning now for the increase in corporation tax rates so that you can minimise the potential financial impact on your business. There are a few things you can do to help reduce your overall corporation tax bill including making sure you claim all relevant expenses, reviewing any existing reliefs or allowances, and considering using losses from previous years to offset against future profits. You should also consider speaking with an accountant who can advise you further on how best to plan ahead for the upcoming changes.

The increase in corporation tax rates from 19% to 25% may seem daunting at first but it doesn’t have to be so overwhelming if you take steps now to plan ahead for it, and remember it might not even apply to your business. With proper planning, you can minimise the potential financial impact and make sure that your business continues running smoothly despite these changes in taxation laws. If you would like more advice or guidance on how best to manage these changes, then please don’t hesitate to contact us today! We’re here to help UK small business owners navigate through this difficult period with ease and confidence!

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About the Author

Annette Ferguson 

Owner of Annette & Co. - Chartered Accountants & Certified Profit First Professionals. Helping online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.