Despite the rumours that capital gains tax was going to be radically overhauled in the Budget, it was corporation tax that saw the most significant change. What’s the story?
Speculation that companies would see their tax rates increase in the Budget proved to be well founded, with an increase from 19% to 25% announced in order to help to get public finances back on track. However, there were three safeguard measures announced:
- the change will not take place until April 2023, giving time for economic recovery to set in;
- the new rate will not apply to companies with profits below £50,000, which will continue to use 19%; and
- companies with profits exceeding £50,000 but not £250,000 will pay tax at a “tapered” rate.
A look at the policy note for the announcement shows that the “tapered” rate will be achieved by permitting an amount of marginal relief to achieve a gradual increase in corporation tax rates. Details of exactly how this will operate are not included in the note.
Note that the small profits rate of 19% won’t apply to a company that is a “close investment company”, e.g. a small family investment company.