Wondering how you and your business can minimise tax liabilities and retain income?
With the right strategies and careful planning, it is possible to keep more of your hard-earned profits.
First and foremost, you need to be aware of the imminent changes to taxation, including the upcoming increase in Corporation Tax.
Corporation Tax rise
From 1 April 2023, Corporation Tax will rise to 25 per cent for companies with revenues of £250,000 and over.
Small companies with profits up to £50,000 will continue to pay Corporation Tax at 19 per cent.
If your profits lie between these thresholds, you will benefit from marginal rate relief on a tapered scale.
In response to these changes, you may consider carrying forward losses into the new tax year to reduce your overall levels of profitability.
If you face a higher rate of tax, you could, for example, increase your pension contributions or fund the purchase of a company vehicle so that your profits remain below £50,000.
Changing your company’s current year-end might also allow you to manage your profitability and reduce your effective rate of tax following the Corporation Tax rise.
Capital Allowances
Capital allowances can be claimed as a way of reducing your taxable profits.
There is enhanced relief available under the annual investment allowance (AIA) regime and the super deduction regime.
If your business buys a piece of equipment that qualifies for AIA, you can deduct 100 per cent of the cost of that asset from your business’s profit before you work out how much tax is due on that profit.
Super deduction, on the other hand, is only applicable for incorporated companies and will be ending on 31 March 2023.
Companies investing in qualifying new plant and machinery assets will be able to claim:
- a 130 per cent super-deduction capital allowance on qualifying plant and machinery investments or
- a 50 per cent first-year allowance for qualifying special rate assets.
Research and Development (R&D) tax credits
Businesses that invest in producing new products and services, or improving those already in place, are qualified for R&D tax relief.
If you make an R&D tax credit claim, you may receive either a cash payment and/or a decrease in Corporation Tax.
This relief is available to large, small, and medium-sized businesses.
If you require support with the above, please get in touch with your Seymour Taylor representative or contact us on enquiries@stca.co.uk 01494 552100.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at time of publishing on 20 February 2023.