Full Expensing and Corporation Tax Rises
What you need to know
Taxation – guaranteed to raise the hackles of every business owner and manager. But as tax is payable on the profits of every limited company, it’s a topic that we have to discuss. Whilst we are not accountants and cannot offer advice, we are very much aware of impending changes that will affect our clients.
Corporation tax is increasing from 1st April 2023 along with the short-lived but valuable incentive for companies purchasing plant and equipment. Known as ‘super deduction’ this capital allowance ends on 31st March, 2023. This will be replaced with a new allowance called ‘Full Expensing’.
Here’s an overview of what you need to know.
The UK’s main rate of Corporation Tax (CT) will increase from 19% to 25% with effect from 1 April 2023. A small profits rate of 19% will be introduced for companies with annual chargeable profits of £50,000 or less. A tapered tax band will be introduced for companies with profits between £50,000 and £250,000.
If you are a director or shareholder in a company with higher levels of profits, it is important that you plan for the cash flow implications. You should also consider permitted reasons, such as expenses, that can reduce the amount of corporation tax owed.
Super Deduction Capital Allowance
There is a specific allowance for businesses that purchase plant and equipment – known as capital expenditure.
A very special 130% super deduction capital allowance, introduced in 2021, will expire at the end of March 2023. Until this date, companies can use the allowance to cut their tax bill by up to 25p for every £1 they invest. With the end of the allowance rapidly approaching, it could be a good time for businesses to invest. Access online help to work out the benefit of super deductions for your business. We highly recommend seeking professional advice before purchasing.
Hot off the Press: ‘Full Expensing’ from 1st April, 2023
The Government has just announced a new Capital Allowances offer known as Full Expensing during the 15th March budget. Here is an overview and you can find out more on the government website:
- Full expensing offers 100% first-year relief to companies for qualifying new main rate plant and machinery investments, this is valid until 31 March 2026
- The 50% first-year allowance (FYA) for expenditure by companies on new special rate assets until 31 March 2026
- The Annual Investment Allowance (AIA) provides 100% first-year relief for plant and machinery investments up to £1 million. This is available for all businesses including unincorporated businesses and most partnerships.
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