Corporation Tax

The normal rate of corporation tax is 19% for the financial year beginning 1 April 2022 and will increase to 25% for the financial year beginning 1 April 2023.

In addition, from 1 April 2023, a 19% small profits rate of corporation tax will be introduced for companies whose profits do not exceed GBP 50,000.

Where the taxable profits can be attributed to the exploitation of patents, a lower effective rate of tax applies. The rate is 10%. Profits can include a significant part of the trading profit from the sales of a product that includes a patent, not just income from patent royalties.

The company tax year starts on 1 April.

The main rate of company tax for all non-ring fence profits is 19% for Financial Years 2017-2022.

From 1 April 2023:

The main rate of Corporation Tax will increase from 19% to 25%.
The small profits rate (19%) will apply to single companies with profits of less than £50,000.
Marginal relief will be given for companies with profits between £50,000 (lower limit) and £250,000 (upper limit).
The upper and lower limits of the new chargeable profits bands will be apportioned according to the number of companies that are associated with Corporation Tax.
The thresholds for marginal relief will also be apportioned for short accounting periods.

From 1 April 2023: the marginal relief calculation

Marginal relief is given by reducing the charge to Corporation Tax (25%) by the following:

(U-A) x N/A x F

F = Standard marginal relief fraction (3/200)

U = Upper limit (£250,000*)

A = Augmented profits

N = Taxable total profits

Augmented profits are 'taxable total profits' and any exempt distributions received from companies that are not 51% subsidiaries or held through a consortium.

*Upper and lower limits are reduced where:

There is a short period of account.
There are associated companies; by dividing the limits by one plus the number of associated companies, which the company has at any time during its accounting period.

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