However, this was not always the case. Corporation tax was introduced in 1965 as part of the Finance Act 1965.
The rate has changed over time, from 28% in 2010 to 19% in 2017 and it will change again from 1 April 2023, when new rules will come into effect. Here are the details.
The New UK Corporation Tax Rates
From 1 April 2023, there will be two different rates of corporation tax, depending on the level of profits:
- A small profits rate (SPR) of 19% for companies with profits up to £50,000
- A main rate of 25% for companies with profits over £250,000
There will also be a marginal relief for companies with profits between £50,000 and £250,000, which will reduce their effective tax rate gradually from 25% to 19%.
The new rates will apply to financial years starting on or after 1 April 2023. For example, if your company's accounting year ends on 31 December, you will pay corporation tax at the new rates for the year ending 31 December 2023.
How to Calculate Your Corporation Tax
To calculate your corporation tax liability, you need to work out your taxable profits. This is done by deducting your allowable expenses from your income. Some examples of allowable expenses are:
- Staff salaries and wages
- Rent and utility bills
- Business travel and subsistence
- Advertising and marketing costs
- Interest on business loans
- Research and development costs
