It has been one year since the announcement by Jeremy Hunt that the 25% Corporation Tax band, previously reversed in the September 2022 Minibudget, would indeed be introduced with effect from 1 April 2023. Companies with profits over £250,000 a year will pay tax at this rate. Smaller companies will continue to be taxed at the lower rate of 19%, but this will not apply to close investment holding companies, that will pay tax at 25% whatever their level of profitability.
As a consequence, UK companies will be paying the highest effective tax rate (ETR) since the 1970s and arguably also the highest ETR since the end of World War II.
Although the Headline Rate is lower than in the 1970s when Corporation Tax stood at 52%, due to the constant tightening and modernisation of our tax system, the actual amount of tax being paid is likely to be higher.
There are numerous avenues, structures, and reliefs available which could help with you Corporate Tax liabilities. If you are looking at operating multiple trades or diversifying your investments, you could consider establishing a group corporate structure, allowing you to move dividends up your group tax free, or make inter-company charges or loans. Thus, you can utilise one company’s profits and reinvest them in other businesses and operations.
Furthermore, you may look at incorporating a Family Investment Company (FIC). This allows you to implement a structured Inheritance Tax (IHT) plan allowing for bloodline planning for your family, and your business investments and operations.
Setting up corporate structures, aiding with restructuring, and implementing FICs are services we provide at Signature Group. Please feel free to call on 0333 009 0801 or email at firstname.lastname@example.org if you have an enquiry and we would be happy to provide a free consultation call for you.