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Corporation Tax is due to increase to 25% for the financial year 2023, starting on 1 April 2023. However, companies with profits of £50,000 or less will continue to pay corporation tax at the current rate of 19%. Companies whose taxable profits fall between £50,000 and £250,000 will then pay corporation tax at 25%, but will receive marginal relief, effectively reducing amount of tax paid.

Companies with taxable profits of £50,000 or less

A rate of 19% will apply from 1 April 2023 to companies with taxable profits of £50,000 or less. This limit is reduced if the company has associated companies or if the accounting period is less than 12 months.

Marginal relief from 1 April 2023

Companies whose profits fall between the lower profit limit, set at £50,000, and the upper profits limit, set at £250,000, are able to claim marginal relief.

This will provide a bridge between companies with profits of £50,000 or less, and the main rate of 25%, applying to companies with profits of £250,000 or more. The effective rate of corporation tax on profits falling between these two limits will increase gradually. The limits are reduced to reflect the number of associated companies that a company has, for example, being divided by 2 where a company has one associated company. The limits are also proportionately reduced where the accounting period is less than 12 months.

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