Corporation tax hike: Here are the essentials business owners need to know

Sponsored feature | Michael Bretherick, chartered financial planner, Gibbs Denley Financial Planning

The rate of corporation tax your business pays may have changed for the 2023/24 tax year. It could affect your profit margins and long-term plans. While it has increased to 25 per cent for some businesses for 2023/24, it won’t affect all businesses.

The rate of corporation tax a business pays depends on its profits. Rates for 2023/24 are:

- 19 per cent for small businesses with profits below £50,000

- 25 per cent for businesses with profits above £250,000.

Businesses with profits between £50,000 and £250,000 are subject to a tapered rate.

The rise means it’s the perfect time to review your business’s finances and ensure you’re operating efficiently.

Four useful ways to reduce corporation tax

1. Claim all business expenses

You can deduct allowable expenses from your corporation tax bill, such as the running costs of your business, purchasing raw materials and paying employees. It’s important to check your accounts and records.

2. Increase pension contributions

Pension contributions are classified as allowable business expenses, which can be deducted from company profits before calculating corporation tax. Boosting pension contributions could reduce the amount of tax your business pays and secure your long-term finances.

3. Claim capital allowances

If you buy assets that you keep to use in your business, like equipment or business vehicles, you may be able to deduct some or all of the value from your profits before you pay tax.

4. Claim research and development tax reliefs

There are generous research and development (R&D) tax reliefs available that you may be able to take advantage of, if your project is eligible.

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Contact us to talk about your business finances

Depending on your business and circumstances, there may be other steps you could take to reduce corporation tax. Contact us to discuss your business and how the changes could affect your long-term finances. Call 01954 233650 or email financial@gibbsdenley.co.uk.

This article is for general information only and does not constitute advice. The information is aimed at retail clients only. This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. Gibbs Denley Financial Planning is a trading style of Gibbs Denley Financial Services Ltd.

Visit gibbsdenley.co.uk.