Changes to UK Corporation Tax Rates – What You Need to Know

tax rates blog header

The UK corporation tax rates have undergone some significant changes that came into effect on April 1st, 2023 (and no, it wasn’t a funny April fools joke!) As a business owner, it’s important you understand these changes and how they could impact your company’s tax liability.

The New Corporation Tax Rates

Up until this tax year, all companies paid corporation tax at a flat rate of 19% on their profits. Now the rate you’ll pay depends on your level of profits:

  • Profits of £50,000 or less: You’ll continue to pay the small profits rate of 19%
  • Profits over £250,000: You’ll pay the new main rate of 25%
  • Profits between £50,000 and £250,000: You’ll pay a sliding scale rate between 19% and 25%, calculated using marginal relief

How does Marginal Relief Work?

Marginal relief ensures a gradual increase in your corporation tax rate as your profits rise from £50,000 to £250,000. The government provides a marginal relief calculator to work out your exact liability based on your profit level.

If you are a client of PPF, we’ll continue to estimate your corporation tax in your quarterly reports. We’ll also provide estimates before your year-end so you can properly budget and avoid any nasty surprises.


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Reviewing Your Salary vs Dividends

With higher profit companies now paying increased corporation tax, it’s a good idea to review your current salary vs dividend distribution. What minimised your tax liability before may not be the most effective approach anymore.

Let us know if you need us to re-evaluate the optimal mix for your circumstances. We’re happy to ensure you continue maximising tax efficiency.

We hope this gives you a clear overview of the key changes and what they mean for your business. If you have any other questions, we’re here to help!

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