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For better or for worse to the country, the taxation changes came with a not so pleasant presence. The increase of the corporate taxation was implemented as promised by the then Chancellor of the Exchequer Rishi Sunak (now Prime Minister of the country).
In particular, while in recent years England had taken a downward course in the corporate tax rate, thus attracting to the formation of companies in England, now from April 2023 this has changed, at least for the year 2023/24 and as it seems as long as the current prime minister remains.
But let's focus on the numbers, which is our subject of this particular article. From 19%, we now go up to 25%, but not in general and for the whole amount. Specifically, 19% will remain for businesses with profits up to £50,000. But if the company has profits over £50,000 and up to £250,000 the rate is 25% with the possibility of "Marginal Relief" - a kind of tax credit. For profits over £250,000 there is no tax relief and the rate remains fixed at 25%. Let's see an example to understand things better.
EXAMPLE
Let's say we have a company with the following details.
Business financial year: April 1, 2023 to March 31, 2024
Turnover: £100,000
Expenses: £30,000
Profits: £70,000
Did your company receive any distributions? (dividends, assets...)? - NO
Did your company have any active associated companies?- NO
➤ Tax applicable (25%): £17,500
➤ Marginal Relief: £2,700
➤ Tax rate applied: 21.14%
Detailed report - Calculation:
Maximum limit for tax relief: £250,000
Taxable income £70,000
Taxable income + any distributions (0): £70,000
Marginal Relief fraction: 0.015
Calculation: (£250,000 - £70,000) × (£70,000 ÷ £70,000) × (0.015) = £2,700
See here the rates of corporation tax in England for all years.
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ATTENTION!
This article intends to give only a general informative picture and should not, in any case, be taken as a rule. It is strongly recommended to seek a full and professional guidance specifically for your circumstances before making any decisions.