Corporation tax rises from April 2023 – a summary of what you need to know

As most people know by now, the main rate of corporation tax is set to increase from April 2023.

In this article we will illustrate the key points every business owner should be aware of, so timely planning can take place to prepare for the coming change.

Key points 

• The main rate will increase to 25% (from 19%) from 1st April 2023

• For companies with taxable profits of £50,000 or less – the small company’s rate of 19% will apply 

• For companies with taxable profits of more than £50,000 but £250,000 or less, 25% corporation tax will be payable less marginal relief 

• For companies with taxable profits of more than £250,000, 25% corporation tax will be levied

Example

Company A has taxable profits of £100,000 over the 12 months ending 31st March 2024.

Because the taxable profits fall between £50,001 and £250,000, the company will be taxed at 25% less marginal relief.

The calculation applied is therefore:

                                                                                                 £

Main rate 25% x Taxable profits:

 25% * £100,000 =                                                              25,000

Less: Marginal Relief:

(£250,000-£100,000) * (3/200)                                     (2,250)

Total Corporation Tax Due                                              22,250

 *Note (3/200) is the standard marginal relief fraction

The effective real rate of corporation tax is therefore 22.25% (i.e., £22,250/£100,000).