On 1 April 2023 will raise corporate tax for UK companies

Corporate income taxes are an important source of revenue for the United Kingdom’s government. The tax system is administered by Her Majesty’s Revenue and Customs (HMRC) and applies to all types of companies, regardless of their size or legal structure.

Corporate Income Tax Rates

The standard rate of corporate income tax in the UK is 19%. This rate applies to all profits earned by companies, except for ring-fenced profits, which are subject to a different rate. Ring-fenced profits are profits generated from oil and gas extraction activities in the UK or UK Continental Shelf.

The rate of corporate income tax has remained at 19% since 2017. However, the government has announced plans to increase this rate to 25% for larger companies in 2023. The 25% rate will only apply to companies with profits of £250,000 or more.

Small Profits Rate

The UK also has a Small Profits Rate (SPR) of 19%. The SPR applies to companies with profits of £50,000 or less. This rate provides a tax break for small businesses and startups, encouraging entrepreneurship and growth.

Patent Box

The UK offers a tax incentive for companies that hold patents, called the Patent Box. The Patent Box provides a reduced tax rate of 10% on profits earned from patented inventions. To qualify for the Patent Box, the company must have created or developed the patent and must be actively exploiting it.

Capital Allowances

Capital allowances are available to companies for certain types of capital expenditure, such as investments in plant and machinery. These allowances provide a tax deduction for the cost of the investment, reducing the company’s taxable profits.

Loss Relief

Companies that incur losses in a tax year can carry those losses forward and offset them against future profits. Loss relief is available for an unlimited amount of time, and losses can also be carried back and offset against profits from the previous year.