Published: 27/02/2023 By Thomas Agyapong
Corporation tax rates are due to change, this will take effect from April 2023 - the new corporation tax rates will be 19% and 25%.Businesses with profits of £50,000 or below would still only have to pay 19% under the small profit rate. Businesses with profits over £250,000 will have to pay 25% at the main rate. Businesses earning profits between £50,000 to £250,000 will be able to claim marginal relief.
Marginal relief provides a gradual increase in corporation tax rate between the small profits rate and the main rate.
If your accounting period is shorter than 12 months these limits are proportionately reduced. These limits are also proportionately reduced by the number of associated companies your company has.
Below is a summary of the changes:
| For Year 2022 (01.04.22 - 31.03.23) | For Year 2023 (01.04.23 - 31.03.24) | |
| Small (< £50k) | 19% | 19% |
| Marginal (< £250k) | 19% | 19% < 25% |
| Main | 19% | 25% |
| Instalments - large | £1.5m | £1.5m |
| Instalments - very large | £20m | £20m |
From 1st April 2023, size thresholds will be divided by the number of associated companies.
You cannot claim Marginal Relief if:
- you’re a non-UK resident company
- you’re a close investment holding company
- your profits (including distributions from unrelated, non associated companies) go over £250,000
Tax changes on dividends
How much tax you pay on dividends above the dividend allowance depends on your Income Tax band.
From 6 April 2022 to 5 April 2023 tax year:
Tax band | Tax rate on dividends over the allowance |
| Basic rate | 8.75% (2022 7.5%) |
| Higher rate | 33.75% (2022 32.5%) |
| Additional rate | 39.35% (2022 38.1%) |
The dividend allowance reduces the tax-free allowance for dividend income from £2,000 to £1,000 from 6 April 2023 and then to £500 from 6 April 2024 for individuals who receive dividend income.
Please get in touch if you require more information or how this may affect your business, call 020 8661 7878 or email bsg@turpinba.co.uk