April 2023 has seen a number of corporate tax rates and tax thresholds changing. As with any tax changes, we work closely with our clients to advise them and help them with their short and long term tax planning.

The 2023 tax rates changes could mean a higher burden for many businesses but some may produce tax planning opportunities. The main tax rates changes to consider for your business in 2023 are the Corporation Tax rise and the changes to Capital Gains Tax (CGT).

It makes sense to consider whether there are any actions that directors can take to reduce a company’s tax burden, particularly in the current macro-economic conditions of high inflation and with the restriction of lending from banks. In this blog we cover the main corporate tax changes and tax planning opportunities you may have in the current tax year and beyond.

Corporation tax

The main rate of corporation tax rate increased from 19% to 25% from 1 April 2023.

There is still a 19% rate in play for taxable profits below £50,000 and then a tapering regime at a rate of 3/200 up to £250,000, from where the 25% rate is fully engaged.

These limits are also divided by the number of companies within a corporation tax group, so many companies (those whose profits fall in the marginal rate) will be looking at an effective 31.5% increase in their corporation tax rate this year!

There are also opportunities for a company / group with seasonal trading activities.  If a company has made sizeable levels of profits prior to 31 March 2023 with a fall off on profit levels subsequently, it could consider shortening its accounting period to 31 March 2023 or before, in order to secure the 19% corporation tax rate.

If profit levels are surging post 31 March 2023, then the accounting period could be extended post 31 March 2023 to bring some profits into the 19% tax rate rather than solely the 25% rate.

This is of course subject to Company law restrictions regarding changes of accounting period, particularly if a company has only recently extended its accounting period or it is the first period of accounts where there are more restrictions on what a company is permitted to do.

Capital gains tax (CGT)

If a company has a capital gain to report, this will be included in the taxable profits of the accounting period in which the date of disposal falls.  If this is a significant taxable gain, then the increased corporation tax rate could make a difference of up to £60,000 increased tax on a £1million taxable gain.

It may be worthwhile considering if the disposal date is prior to 31 March 2023, ending the company’s accounting period on 31 March 2023 to ensure the gain is taxed wholly at 19%.

If the gain is realised on or after 1 April 23, the prior accounting period could be extended to end after the disposal date so some of the gain is taxed at 19% – the total profits of an accounting period being time apportioned over the whole accounting period.

Care is however required as where a period of account is of over 12 months the first 12-month period is treated as an accounting period and a capital gain will fall into one of the two periods of account within the accounting period and will not be time apportioned in this case.

Summary

Good corporate tax planning advice is key when any tax changes happen. It is important that you make use of all available allowances and tax relief for your business, review your business structure and seek advice from a tax expert.

For more help and advice on corporate and personal tax planning, contact us.