Increased corporation tax rates and changes to capital allowances
Corporation Tax Rate
From April 2023 the main rate of corporation tax has risen from 19% to 25%.
This new 25% main rate applies to all companies with profits over £250,000. Companies with profits between £50,000 and £250,000 will also pay tax at the new increased main rate, but with marginal relief.
Most companies with profits under £50,000 will continue to be taxed at 19%.
Note that the limits are reduced for associated companies and that investment companies will pay tax at the 25% rate regardless of their level of profits.
Changes to Capital Allowances
The 130% first-year allowance super-deduction regime for new qualifying plant & machinery ended on 31 March 2023.
This is replaced by a 100% first-year allowance for qualifying plant & machinery, known as full expensing, and a 50% first-year allowance for qualifying special rate assets.
The amount of expenditure that can qualify for these reliefs is uncapped.
The temporary extension of the Annual Investment Allowance (AIA) to £1,000,000, which had been due to expire on 31 March 2023, has been made permanent with effect from 1 April.
Expenditure on second-hand assets and those bought to lease to someone else can still qualify for the AIA, despite not being eligible for full expensing.
These changes have now taken effect following several contradictory corporation tax announcements in budgets over the previous 12 months.
To discuss how all of these changes may impact your own business, please get in touch with your usual Warrener Stewart contact or email us on info@warrenerstewart.com