Changes in the Corporation Tax (CT) amount businesses pay came into effect on 1 April.
The main rate of CT rose from 19% to 25% for the most profitable companies for the financial year beginning 1 April 2023. Companies whose year-end is 31 March will pay 19% CT for the 2022/23 period and 25% for the 2023/24 period.
Hybrid Corporation Tax rate
However, for companies whose accounting period straddles 1 April, it will be necessary to apportion profits between those that arose up to 31 March and those after 1 April.
Generally, the amount of Corporation Tax due will effectively rely on the taxable profits your company makes as follows:
- Small companies with profits of up to £50,000 will pay CT at 19%
- Companies with profits of £250,000 and over will pay CT at 25%
- Companies with profits over £50,000 but under £250,000 will pay on a sliding scale of between 19% and 25%
Where companies have taxable profits between these two thresholds, it is more complex as the tax rates they pay will depend on their profit levels due to the Marginal Rate Relief (MRR); a tapered relief that increases in line with a company’s profits.
HM Revenue & Customs (HMRC) method to calculate this relief is quite complex, so seek advice from your professional advisor.
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