Upcoming Tax Changes
Corporation Tax Rate Increase
Up to 31st March 2023 the corporation tax rate remains at 19%. From 1st April 2023 it increases for companies with taxable profits in excess of £50,000. For companies with taxable profits between £50,000 and £250,000 the rate will gradually transition from 19% to 25%.
The rate for companies with a taxable profit in excess of £250,000 will increase to 25%.
Note that if there are Associated Companies, the taxable profit parameters are split between the number of companies, so two Associated Companies means the 25% rate kicks in at £125,000. Broadly, a company is associated with another company if at that time, or at any point within the preceding 12 months:
one company has control of the other, or
both companies are under the control of the same person or group of persons.
Dividend Tax Rate
Up to 5th April 2022 dividends are taxed on individuals at the following rates:
From 6th April 2022 the rates increase by 1.25% to:
It is therefore worth maximising dividends declared before 5th April 2022, provided there are sufficient profits and reserves to cover the dividend.
We think it is also worth being particularly careful to document the declaration of the dividend before 5th April 2022, in case of an HMRC request for evidence the dividend was declared before the year end and not in retrospect (for example a dated Board Minute).
Increases in National Insurance Rates
Employer and Employee (and self-employed) National Insurance rates are due to increase by 1.25% from 6th April 2022.
A couple of options that business owners may want to consider to mitigate the increased costs include:
Looking at share option schemes rather than bonuses for higher earners
Salary sacrifice pension contributions, as this reduces the salary on which employee and employer NICs are paid.
An article about Salary Sacrifice pension contributions will be included in our next newsletter.
Super Deduction Capital Allowances
This is a new 130% first-year capital allowance for qualifying plant and machinery assets and a 50% first-year allowance for qualifying special rate assets. It applies for qualifying capital purchases made between 1st April 2021 and 31st March 2023 (for companies only, not LLPs or individuals).
The super-deduction details can be found here.
Note, the super-deduction capital allowance only applies to new items. It does NOT apply to purchases of used equipment. It also does NOT apply to purchases of cars (including electric cars) but does apply to purchases of vans. There are other exclusions, so please check with us before committing to a purchase.