Corporation Tax and Marginal Relief From 2023

2023: Corporation tax rises to 25%. Profit to £50,000 only pays 19%. Profit £50,000 to £250,000, 25% less marginal relief. Here’s how to calculate that.

Corporation Tax Rates and Reliefs from 2023

As a consequence of the 2021 budget, corporation tax at 25% marks a return to the era of the high company taxation of the 1990s.

Marginal relief for moderate SME profits, albeit at a 2/300 fraction, far less generous than was the case back in the 1990s will also make a comeback, this time for profits between £50,000 and £250,000.

Taxable profits not exceeding £50,000 will continue to be taxed by HMRC at 19%..Here are examples showing how the different tax charges and marginal relief will work out..

Small Taxable Profits 2023
Threshold £50,000
Taxable Profit £45,000
Applicable Corporation Tax Rate 19%
Corporation Tax Charge £8,550

 

Marginal Profits £50,000 to £250,000 2023
Upper Threshold £250,000
less: Taxable Profit £100,000
Marginal Balance £150,000
Divide Marginal Balance by 200 £750
Multiply by 3 (equals Marginal Relief) £2,250
Tax at 25% of Taxable Profit £25,000
less: Marginal Relief £2,250
Corporation Tax Charge £22,750

Taxable Profits Above £250,000

For all taxable profits above £250,000 .25% is the flat rate.

This means that none of the concessions above apply to the first £50,000 or to profits between that and the £250,000 threshold. HMRC will charge orporation tax at the rate of 25% on the whole of the taxable profit.

Figurewizard and Corporation Tax

When producing profit, balance sheet, cashflow and liquidity forecasts Figrewiard automatically calculates the corporation tax charge from your own predicted figures for sales, margin, overheads, finance and so on. The same goes for VAT.

Our sample corpration tax forecast clearly illustrates how that tax calculation is made, step by step.

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