Jack Bennett Tax Consultant

What is corporation tax?

Corporation tax is the tax that companies pay on their trading profits. Corporation tax must be paid on profits from doing business as a limited company, any foreign company with a UK branch or office or a club, co-operative or other unincorporated association e.g. a community group or sports club. The rate of corporation tax was cut rapidly by the Conservative Party when they came into power in 2010, from 28% in 2010 to 19% in April 2017. 

In March 2021 former Chancellor Rishi Sunak said corporation tax would rise from 19% to 25% in April 2023. This was as a result of the significant support to businesses during the Covid pandemic. Ms Truss then announced in July 2022 that she would be reversing the rise and in fact keeping corporation tax as it was at 19%, in a bid to attract more investment into the UK.

This was confirmed in the mini budget of September 2022 by Ms Truss’s then-chancellor, Kwasi Kwarteng. Due to the negative reaction of the markets, to the mini-budget, the increase in the Corporation Tax rate was again included in the Government’s tax policy. 

How is the corporation tax changing?

The Corporation tax rise will be taking effect from April 2023, a rise of 6% on the corporation tax rate applying to businesses with profit over £250,000. For companies with profits of £50,000 or less there will be a small profits rate of 19%. The main rate will taper in between £50,000 and £250,000. 

As an approximate figure, £18 billion will be raised per year as a result of the 6% rise in corporation tax. On the 31st October 2023, the Office of Budget Responsibility (OBR) will assess the fiscal impact of the change. 

How do I report and pay the corporation tax?

The Corporation tax liability for a company is reportable on a Corporation Tax Return, prepared from the accounting records that the company maintains. Corporation Tax is payable 9 months and 1 day after the end of your accounting period, although the Corporation Tax Return is not due to be filed with HMRC until 12 months after the end of the accounting period. 

Useful links: https://www.gov.uk/corporation-tax
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Please note: This article is provided for information only and was correct as at time of writing (09/01/23). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.