Corporation Tax Rises by 6% – Calculate Your Increase

Corporation Tax Rise Calculator

Corporation tax is due to rise from 19% to 25% in April 2023. Try our calculator below to see how much extra tax you will pay?

In the March 2021 budget the Government announced a corporation tax rise of 6%. This applies to businesses with profits exceeding £250,000.

For businesses with profits under £50,000, the corporation tax rate will remain at 19%. The Government have estimated that around 70% of all trading companies have profits below this £50,000 threshold.

An effective rate of 26.5% is applied to profits between £50,001 and £250,000.

NOTE: When considering that just over a year ago the proposed cut to a 17% tax rate was scrapped a tax rate of 26.5% will have a significant effect on small businesses.

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Corporation Tax Rises – FAQs

Below are some frequently asked questions on the new corporation tax rises.

What is the current corporation tax rate?

The current tax rate is 19% and will remain at 19% until April 2023.

What will the corporation tax rate be from April 2023?

The corporation tax rate in April 2023 is set to increase to 25% for businesses with profits over £250,000.

What will be the corporation tax rate for small companies?

From April 2023, there will be a small companies tax rate of 19% for profits under £50,000.

There will then be an effective rate of tax of 26.5% for profits between £50,001 and £250,000.

Why is the effective rate 26.5% which is above the main tax rate of 25%?

There is an effective tax rate of 26.5% to ensure that those with profits over £250,000 are taxed at 25%. This is illustrated below:

First £50,000 taxed at 19% gives a tax liability of £9,500
Next £200,000 taxed at 26.5% gives a tax liability of £53,000
The total tax charged on first £250,000 profits is £62,500 (which is a tax rate of 25%)

Will associated company rules return?

We anticipate that there will be anti-tax avoidance legislation including associated companies rules. These rules will be required to avoid say a £300k profit company, splitting up into 6 companies and declaring £50k profit at the lower tax rate.

See the HMRC website for further information.

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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