April 2023 Corporation tax

[akirk]

Looks as though the government has done another u-turn and is back onto the idea of raising corporation tax from 19% to 25% next April

Apparently Sunak's original idea because corporations had received so much support through Covid they should repay that support...

well... that will be except for the million+ small owner run businesses who received almost no support at all - other than the opportunity for a BBL which they are already repaying. The businesses which only employ their directors - so no furlough / have no premises - so no rate reductions / etc. That massive hole of small businesses who were not supported through Covid are now going to be hit by their corporation tax rising by 30%+

Hardly going to encourage investment of business into the country...

[Simpo Two]

Tough isn't it. You lower tax and everybody complains, you raise it and everybody still complains!

[Mr Overheads]

Historically bigger companies paid a lower rate. Perhaps it's time to reverse the rates. SME's pay 19% and the big co's pay 25%.

[Douglas Quaid]

The people that have small businesses and are making a living but are not rich got no support whatsoever during covid and are now being punished again.

It feels like the government just want large corporations to exist and fk the small business man.

Does anyone know what the threshold is for 25% rate, or is it just everyone?

[StevieBee]

akirk said:

The businesses which only employ their directors - so no furlough.

If the Directors were drawing a salary via PAYE then they would have been entitled to Furlough. Only those that relied purely on dividends would have been excluded.

As Simpo says, you're never to going satisfy everyone on things like this.

Owning and running a business remains a very tax-efficient way to earn a living - as it should because we spend a great deal time acting as unpaid tax collectors for the government and take high levels of risk so there needs to be some degree of incentive.

[Eric Mc]

This is how the new Corporation Tax rates will work from April 2023 -

From 1 April 2023, the Corporation Tax main rate for non-ring fenced profits will be increased to 25% applying to profits over £250,000. A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.

[Acorn1]

Thank you for the clarification, do you know what the sliding scale is for profits between £50 - £250k?

Or have I misread?

[Terminator X]

19% reasonable 25% not so much so I'd say a lot of owners will be looking to minimize profits now. 25% of sweet FA is still sweet FA.

TX.

[akirk]

Thank you Eric - hadn’t seen that clarification which will help many…

But as others have said - it becomes an incentive to earn less as tax rate goes up - whereas lower taxes are an incentive to grow the business - which is surely better for the economy?

Ref furlough - yes if directors were employed but there are a lot of businesses where the director salary is low to pick up NI but stay close to your allowance, and the rest through dividends - furlough really didn’t help those people…

[Rufus Stone]

Acorn1 said:

Thank you for the clarification, do you know what the sliding scale is for profits between £50 - £250k?

Or have I misread?

It's not really a sliding scale. For the band £50,000 - £250,000 the tax rate is 26.5%.

The 'effective' tax rate is the 19.0% bit plus the 26.5% bit, meaning that the total tax measured against total profits gradually increases from 19.0% at £50,000 profit to 25.0% at £250,000 profit.

[isleofthorns]

not to forget the associated companies rules that will accompany the new rate, such that the 250k band can be split / shared across associated companies....

[db10]

isleofthorns said:

not to forget the associated companies rules that will accompany the new rate, such that the 250k band can be split / shared across associated companies....

for "can" read "will" - its an anti avoidance measure to stop people creating new companies to get access to the small companies rate again

[Seventy-Eight]

Acorn1 said:

Thank you for the clarification, do you know what the sliding scale is for profits between £50 - £250k?

Or have I misread?

26.5% for the profits between £50k and £250k

[Tebbers]

Genuinely looking at moving my software company and myself overseas after this. All my staff work remotely anyway. UAE looking good currently.

[DKL]

The BBC reporting today is very confusing.



This seems to read that the uplift has been scrapped but I assume it hasn't?

[Dr Jekyll]

DKL said:

The BBC reporting today is very confusing.



This seems to read that the uplift has been scrapped but I assume it hasn't?

It's the cancellation of the uplift that's been scrapped. The increase will happen.

All rather reminiscent of the famous US headline, 'governor fails to block a move to abandon plans to restrict birth control'

[Eric Mc]

I thought the reduction of Income Tax from 20% to 19% was not now going to happen.

Too many back flips going on.

[Dr Jekyll]

Eric Mc said:

I thought the reduction of Income Tax from 20% to 19% was not now going to happen.

Too many back flips going on.

It isn't.

[Super Sonic]

Terminator X said:

19% reasonable 25% not so much so I'd say a lot of owners will be looking to minimize profits now. 25% of sweet FA is still sweet FA.

TX.

I don't see this. You may be paying more tax on profit over a certain amount, but you're still making more money.

[Eric Mc]

Dr Jekyll said:

Eric Mc said:

I thought the reduction of Income Tax from 20% to 19% was not now going to happen.

Too many back flips going on.

It isn't.

I know. But lots of conflicting and incorrect comments being made in various places. As I said - chaos reigns.