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Corporation Tax

November 3, 2023

From 1 April 2023 the rate of corporation tax that a company pays depends on 2 factors

  1. The number of “associated companies”
  2. The level of company profits

An “associated company” for corporation tax purposes are those under common control. The most likely situations are:

  1. Where one company has control of the other, or
  2. Both companies are under the control of the same person or persons.

In determining control, the rights and powers of an individual’s associates may be taken into consideration, but only where commercial interdependence (financial, economic or organisational) can be proven. This is not straightforward and we can assist with determining any impact on your business if it applies.

The level of company profits and rates of corporation tax are as follows:

  1. Profits of £50,000 or less = 19% tax rate
  2. Profits of £250,000 or more = 25% tax rate
  3. Between £50,000 and £250,000 the marginal rate is 26.5%

In any business tax planning is effective but any company falling in the marginal rate should be really benefit from thinking about purchasing new assets or paying additional pension contributions on behalf of the directors. Reliable monthly profit calculations will indicate which bracket your business will fall into and ensure the correct timing of any expenses to reduce your profits.

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