After a fairly torrid few weeks for the Government, Prime Minister, Stock Markets, Currency and the UKs economy, a further U turn from the Government Growth Plan of 23rd September 2022 has been announced.
As a recap the first U turn was 3rd October, when the proposed abolition of the 45% Additional Rate Income Tax Band on income over £150k was withdrawn – this rate will remain into 2023/24, along with the associated Dividend Tax Rate.
Today we have a further U turn with the 2023/2024 increases in Corporation Tax, which the Growth Plan abolished, have been reinstated.
This means our original briefing on 2023 Corporation Tax Changes remains current.
To recap
- Currently Corporation Tax is a flat 19% on business profits, regardless of their magnitute
- The Johnson/Sunak administration announced an increase of the basic Corporation Tax Rate to 25% from April 2023, ie 2023/24 fiscal year.
- The increase also brought in a Small Profits Rate of 19% where profits are below £50k, and a taper between £50k and £250k.
- The Growth Plan on 23rd September reversed these increases, moving back to a flat 19% regardless of profits
- Todays U turn takes us back to the original proposed 25% rate and associated Small Profits19% rate
Its worth noting that the interaction of the Small Profits Threshold and Marginal Relief creates anomalies with marginal tax rates being higher than 25%. The marginal Corporation Tax Rates are:
| Profit Band | Marginal Rate |
| £0 to £50,000 | 19% |
| £50,000 to £249,000 | 26.5% |
| £250,000 plus | 25% |
Of course no Government Minsters are talking about 26.5% as its an inconvenient truth.
Note the above is the Marginal Rate of tax on each extra bit of profit. Average Blended Rate will always be 25% or below.
Our briefing expands on this: