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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.

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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:

  1. There is a short period of account.

  2. 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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