One of of Liz Truss’ flagship policies was to halt the planned rise in corporation tax rates from 1 April 2023.
However these increases will now go ahead. From 1 April 2023, corporation tax will increase to 25% where a company’s profits exceed £250,000 a year. The current 19% rate will however continue to apply where profits are no more than £50,000 a year.
Where a company’s profits fall between £50,000 and £250,000 a year, an effective rate of 26.5% applies to profits in excess of £50,000. Some companies that are connected or in the same corporate group must share these size limits, making the 25% rate more likely to apply.
Even at these higher rates, the UK remains competitive compared to other major trading countries
IMPACT ON PROFIT EXTRACTION
The corporation tax rate increases and the continuance of the higher income tax rates on dividend will impact on the profit extraction strategies adopted by director/shareholders in 2023/24.
Again, this may be affected by the Autumn Statement on 17 November 2022 but please do contact us to discuss how the changes affect you.