Corporation Tax
The Chancellor in his speech and all subsequent Spring Statement releases have been silent on the proposed increase to Corporation tax rates from April 2023. This may simply be because they do not intend to make any changes to the original proposals or the Government may be reserving judgement on the proposed increase until later in the year.
The proposed changes are:
Corporation Tax Rates
With effect from 1 April 2023, the main rate of corporation tax will be increased from 19% to 25% for profits over £250,000. A small profits rate of 19% will be charged on profits of up to £50,000. Profits between £50,000 and £250,000 will incur tax at a marginal rate of 25.5%. Thereafter, the rate is 25%. These thresholds are reduced where there are multiple companies under common control.
Section 455 Tax on Overdrawn Directors’ Loan Accounts
Companies must currently pay “Section 455” tax at 32.5% on an overdrawn director’s loan account that is still outstanding nine months after the end of the accounting period in which it is made. The tax applies to shareholders (typically directors) in closely controlled companies.
The section 455 tax will increase from 32.5% to 33.75% on loans advanced from 1 April 2022. The increase will not affect earlier loans.
Quarterly Instalment Payments
From 1 April 2023, the 51% group company test will be replaced by the more complex associated companies test for quarterly instalment payments. This is likely to bring more companies into the scope of this regime as it will affect companies under the common control of a person, even if they are not in a corporate group.
This article is a part of our dedicated Spring Forecast Statement hub. For more analysis and insight, please click here.
