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Changes in Corporation Tax from 1st April 2023 explained with examples.

Corporation Tax has changed from 1st April 2023. In this blog, we have explained what has changed and discussed their impact with examples.

Corporation Tax:

  1. Companies with profits below £50,000 will not be impacted as they will keep on paying corporation tax at 19%.
  • Companies with profits exceeding £250,000 will pay corporation tax at 25%.
  • Companies with profits up to £250,000 will be taxed at a marginal tax rate. In simple words, the first £50,000 will be taxed at 19% and any balance between £50,000 to £250,000 will be taxed at 26.5%. Overall, the more the profits closer to £250,000, the higher the overall amount of tax a company will pay touching close to 25%.

Please see below the table showing how the increase in corporation tax will affect you.

 Before 1st April 2023After 1st April 2023Increase in Tax
ProfitTax RateTaxTax RateTax 
50,00019%         9,50019%            9,500                     –  
250,00019%       47,50025%          62,500             15,000
100,00019%       19,00022.75%          22,750               3,750
200,00019%       38,00024.63%          49,250             11,250

You can see from the above examples that a company with profits of £100,000 will be paying corporation tax at a rate of 22.75% and a company with profits of £100,000 will be paying corporation tax at a rate of 24.63%.

What if Ltd company’s Year-end falls over two financial Years?

If your accounting period falls over two financial years, then any period before the 1st of April 2023 will be taxed at the normal 19% corporation tax rate, and any period falling after the 1st of April 2023 will follow new rules as mentioned above. For instance, if the accounting period of a company is 30th September 2023, then 6 months are falling into old rules and the next 6 months will fall into new rules. Let’s take an example of the above year-ended 30th Sep 2023.

Your accounting period covers 2 HMRC financial years:

  1. 2022 to 2023: 1 October 2022 to 31 March 2023
  2. 2023 to 2024: 1 April 2023 to 30 September 2023

Corporation Tax liability will be £20,885. Effective rate of tax is £20.89%

 2022 to 20232023 to 2024Overall
Days allocated to each financial year 182Days 183Days365Days
Corporation Tax liability before Marginal Relief           9,474          12,534£22,008
Marginal Relief                 –            (1,123)(£1,123)
Corporation Tax Liability after Marginal Relief           9,474          11,411£20,885
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