Higher corporation tax is coming – here’s how you can prepare

We are less than a year and a half away from a major change in corporation tax (CT) that could very well affect your business. From April 2023, there will be two bands of CT. For companies that make up to £50,000 in profit, CT will remain the same, 19%. But for all other businesses, a major hike is on the way, and they will be taxed at 25% on all profits over £250,000. Companies that see their profit fall between these two limits will be able to claim marginal relief that translates into a gradual increase in CT.

For businesses eligible to pay the full amount, this is not a small tax increase. So, it is vital to start planning for it now if you want to mitigate the impact it will have on your business. Here are three things you can do today to ensure you put yourself in the best position to adjust in fifteen months’ time:

Consider deferring expenditure if possible

If your business is expecting profits above £50,000 after undertaking significant expenditure in the fiscal year beginning this April, it might be worth deferring those expenditures to the year beginning 1 April 2023. This is so you incur extra tax this year, at the current rate of 19%, and reduce the amount you’ll be taxed on the following year, at a higher rate.

Accelerate as much income as possible

If it is commercially possible, it might be worth bringing income forward from the 2023 – 2024 fiscal year to the 2022 – 2023 fiscal year. Similar to deferring expenditure, moving income forward a year would ensure you pay tax on it under the current CT regime rather than a future one.

Put your tax losses to good use

Just as with the two points above, you will need to use your judgement when deciding when to surrender your tax losses. If they can be deferred and utilised in 2023 – 2024, then you could potentially reduce your CT at a higher rate.

Of course, many businesses may find it impossible to take the steps above, so you should think carefully before you take any action. If you need assistance deciding what steps are right for your business when it comes to mitigating the impact of future CT, then call JW Hinks on 0121 456 0190. Our friendly team of professional tax experts can help to ensure that you are not paying more than you need to.