A large proportion of last week’s budget was dedicated to business, and as we approach the tax year-end there are a number of imminent changes to corporation tax and capital allowances to be aware of.

Corporation tax 

From April 2023, the main rate of corporation tax for companies with profits over £250,000 will increase to 25%. Following this, the current 19% main rate will become a small profits rate, payable by companies with profits of £50,000 or less. In between this, companies with profits ranging from £50,001 and £250,000 will pay tax at a marginal relief. This rate provides a fair and gradual increase in the effective corporation tax rate, as a company’s profits increase.

For those in the creative industry, the reform of tax reliefs that are applied to film, TV and video games companies was announced from 1st April 2024. This will give companies expenditure credits instead of additional deductions. 

Not only this, but the temporary higher headline rates of relief for Theatre Tax Relief, Orchestra Tax Relief, and Museums and Galleries Exhibitions Tax Relief (MGETR) will be extended for another two years, until 31st March 2025. Additionally, the period that MGETR will be available for another further two years until 31st March 2026.

Capital Allowances

You should already be aware that the super-deduction regime is set to end on 31st March 2023. With this in mind, the government is introducing Full Expensing, a new 100% First Year Allowance (FYA). Effective for purchases on or after 1st April 2023, until 31st March 2026, this will enable companies to deduct the cost of qualifying plant and machinery from profits in the first year of purchasing it, with no expenditure limit. The policy includes most plant and machinery (excluding cars), providing that it is unused and not second-hand. Similarly, the 50% FYA can be used for other plant and machinery, such as long life assets and integral features. Both allowances are only available for companies and not for unincorporated businesses. 

Following the COVID-19 pandemic, the government introduced a temporary increased annual investment allowance (AIA). This gave 100% write-off on certain types of plant and machinery up to £1 million. The allowance was supposed to be reduced to £200,000 from April 2023, but the government has instead made the temporary limit permanent.

The above is general information regarding corporation tax and capital allowances. If you have any queries about this topic, please contact a member of the team directly on 020 7625 4545 or email info@mgr.co.uk

Warning: The above is merely general guidance and should not be relied upon as formal advice. The advice we give to each client will depend on their specific circumstances. We suggest you take professional advice before taking any action in relation to the issues discussed above.

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  1. annual investment allowance
  2. capital allowance
  3. corporation tax
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