Corporation tax

The main rate of corporation tax increased from 19% to 25% on 1 April 2023 for companies with profits over £250,000.

The 19% rate became a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,000 and £250,000 pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate. For trading companies this marginal rate is effectivley charged at 26.5%.

A company has to compute its own corporation tax liability and pay this by the due date, which is usually nine months and one day after the end of its accounting period. Strangely, a company tax return has to be filed with HMRC within twelve months of the company’s year end. Interest is charged on late payment of corporation tax, and there are also penalties for late filing of a company tax return.

Depreciation is not allowed for tax purposes, but capital allowances are available instead. companies investing in qualifying new and unused plant and machinery will benefit from first year capital allowances. Under this measure, a company will be allowed to claim:

  • A first year allowance of 100% on most new and unused plant and machinery expenditure that ordinarily qualifies for 18% main rate writing down allowances (Full Expensing).
  • A first year allowance of 50% on most new and unused plant and machinery expenditure that ordinarily qualifies for 6% special rate writing down allowances.

The relief specifically excludes expenditure on cars, and most plant and machinery for leasing. Although zero-emission cars qualify for a 100% first year allowance. Cars with CO2 emissions over 50 g/km will enter the 6% pool. All other cars will enter the 18% pool.

We can support you with pre year end planning and keeping you aware of your likely liability. Call us now to discuss.

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