Full Expensing and Corporation Tax Rises

March 16, 2023 by Christine Frith
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.

Corporation Tax

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.

How you can benefit from the super efficient Hour Hands team!

With willing and able bookkeepers on hand, Hour Hands is always available. We complete those tasks that you just don’t have the time or capacity to do yourselves. We’re also here for guidance to help you run a successful business or home. 

To find out more simply call us on 01727 818262 to discuss how we can support you either on an hourly rate or package cost. The choice is yours as we’re simply here to help.