Here are the changes explained.
Corporation Tax is set to rise from 19% to 25% from 1st April 2023.
The full rate of 25% will only be applicable for those businesses making profits of over £250,000.
Businesses earning profits of between £50,000 to £250,000 will be able to claim marginal relief.
Tax is higher if there are a group of companies.
For those interested, the marginal rate fraction will be 3/200ths, for everyone else leave it to us to do the calculation on your behalf.
However, what this all boils down to is you will be paying more tax in 2023. Time to read our guide to Saving Corporation Tax.
Rishi has softened the blow a little bit by giving a super deduction in advance of the tax increase, but this increase does raise one question…
Does paying yourself a small salary and large dividends make sense in 2023?
For years, paying yourself a small salary and then a dividend out of profit saved you thousands, but with this increase does it still make financial sense?
We are busy with our calculators trying to figure out what the best tax strategy for you is in 2023.
The issue is that Dividends are not tax deductible for Corporation Tax so more of your profit will be chargeable at the prevailing rate of Corporation Tax, which was fine when Corporation Tax was 19% but with the marginal rate it is possible some businesses will be charged 26.5%. So, this needs careful thought.
Don’t worry we have plenty of time and rest assured we will be giving all our clients tailored advice.
