Potentially Even Higher Corp Taxes Coming (Over 25%+)

[Edgar7]

Just read an article today saying there's a 50billion hole in the budget and guess who's going to fill that hole? My bet it'll be the businesses and business owners - safest part of demographic to throw under the bus.

Quote from the article:

Brits brace for the biggest tax burden since World War Two: Jeremy Hunt's November budget 'set to add £25BILLION in hikes' as new Chancellor battles to fill £50bn black hole in public finances​

The tax burden will hit yet another record high as Jeremy Hunt’s Budget next month is set to add another £25billion in hikes.

The planned Halloween Budget has been delayed to November to allow Rishi Sunak to get ‘under the bonnet’ of proposals to close a hole in the public finances said to be ‘north of £50billion’.

Mr Sunak yesterday said the ‘difficult’ package was needed to restore market confidence in the public finances and ‘limit as best as possible the increase in interest rates’.

‘It’s looking like the gap we need to fill will be north of £50billion in the end,’ a source said. Higher taxes may alarm Tory MPs and business – and renew fears of a recession.

Personally I'm fed up with it, paying 25% in corp taxes is high as it is, when you add up all the other taxes you're paying more than 50% of your profits. Given that we were promised that there will be no corp tax hikes, and now not only there will be hikes, but they're probably planning on hiking them even more! If they raise it even 1% above the 25% that'll be a slap in the face. I run a digital business and will be closing it down and registering abroad if they're planning on raising corp taxes even higher.

 

[scstock]

The 25% rate applies to profits over £250k. If your business is making that then you're doing very well indeed and can afford to pay a bit more in tax in these troubled times, especially considering the generous support the government gave to businesses during Covid in terms of grants, furlough payments and low-cost Bounce Back loans. Profits of £50k or less will continue to be taxed at 19%.

 

[Edgar7]

The 25% rate applies to profits over £250k. If your business is making that then you're doing very well indeed and can afford to pay a bit more in tax in these troubled times, especially considering the generous support the government gave to businesses during Covid in terms of grants, furlough payments and low-cost Bounce Back loans. Profits of £50k or less will continue to be taxed at 19%.

Anything above £50k is 26.5% up to £250k, so it's not like you're going to pay only 19% if you're in between £50k and £250k. My point being is that it's very likely the current corp tax will change for the worse.

 

[simon field]

---

The 25% rate applies to profits over £250k. If your business is making that then you're doing very well indeed and can afford to pay a bit more in tax in these troubled times, especially considering the generous support the government gave to businesses during Covid in terms of grants, furlough payments and low-cost Bounce Back loans. Profits of £50k or less will continue to be taxed at 19%.

‘Generous support’ ?

Did you mean spaffing taxpayers money on a panicked overreaction combined with virtually no checks on where it went?

 

[fisicx]

Good job I don’t earn anywhere near that much.

 

[japancool]

I run a digital business and will be closing it down and registering abroad if they're planning on raising corp taxes even higher.

It's only 19% in Russia.

 

[The Byre]

CT is 30% in Germany - and that is from the first Euro to the last.

 

[HFE Signs]

It was always going to be SME's that puck up the shortfall

 

[fisicx]

CT is 30% in Germany - and that is from the first Euro to the last.

But only 25% in France. And 21% plus state taxes in the US.

 

[Newchodge]

But only 25% in France. And 21% plus state taxes in the US.

I could be wrong but I thought that, if you rgister a company in one contry (A) but carry out all of your business in another country (B), B will demand the corporation tax?

 

[japancool]

I could be wrong but I thought that, if you rgister a company in one contry (A) but carry out all of your business in another country (B), B will demand the corporation tax?

I thought it was where the company is deemed to be owned and managed/operated from.

 

[Newchodge]

I thought it was where the company is deemed to be owned and managed/operated from.

Thanks, I think that was what I meant. So living and running your sole shareholder business in the UK and registering in Ireland would not help?

 

[japancool]

Thanks, I think that was what I meant. So living and running your sole shareholder business in the UK and registering in Ireland would not help?

I don't believe so, no. Certainly HMRC would be unimpressed.

 

[ctrlbrk]

This is what current guidance says, to clear any confusion above

Corporation Tax charge and rates from 1 April 2022 and Small Profits Rate and Marginal Relief from 1 April 2023

www.gov.uk

 

[WaveJumper]

Thanks, I think that was what I meant. So living and running your sole shareholder business in the UK and registering in Ireland would not help?

In my commercial property days everything we managed was held in offshore companies, however no bit of paper work, contract etc could be signed in the UK however small, all documents went in the little black bag (I made that last bit up as I don't know what colour the bag was) and sent off to be signed. Took weeks if not months sometimes to get back.

On one occasion after waiting weeks for a very large contract to be signed I once joked with a fund manager that I wished that little old lady out in Jersey would put her knitting down and sign some paper work, he replied thats not too far from the truth.

 

[tony84]

I would employ my 5 year old daughter - £15k tax free allowance there. Then charge her £15k in keep

 

[andywwright]

Anything above £50k is 26.5%

That is not correct.

Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.

 

[Ian J]

I would employ my 5 year old daughter - £15k tax free allowance there. Then charge her £15k in keep

Good idea but you wouldn't get away with it

 

[Edgar7]

That is not correct.

Then why all accounting companies saying it is? Here's 1 example out of hundreds pattersonhallaccountants.co.uk/corporation-tax-rises/

 

[Newchodge]

Then why all accounting companies saying it is? Here's 1 example out of hundreds pattersonhallaccountants.co.uk/corporation-tax-rises/

That does not seem to fit with this part of the official guidance:

Marginal relief provisions will also be introduced so that, where a company’s profits fall between the lower and upper limits, it will be able to claim an amount of marginal relief that bridges the gap between the lower and upper limits providing a gradual increase in the Corporation Tax rate.

 

[free-rider]

Don't think the Gov has published the calculations for marginal relief yet.

Atm, lots of people assume the calls will mirror the old provisions before the CT rates merged. If that will be the case, then yes, the marginal CT rate between £50k and £250k will in fact be 26.5%. Below is from itcontracting website.


"If we assume that the new system of marginal relief mirrors that used in the 2014/15 and previous tax years, the calculation is as follows:

Step 1 – mutiply your annual profits by the main 25% rate.

Step 2 – subtract your annual profits from the upper threshold (£250,000)

Step 3 – multiply the result of Step 2 by the marginal rate multiplier (3/200)

Step 4 – subtract the result of Step 3 from Step 1 – this is your CT liability for the 2023/4 tax year.

Example 1 – £60,000 annual profits

Step 1 – £60,000 x 25% = £15,000

Step 2 – £250,000 – £60,000 = £190,000

Step 3 – £190,000 x 3/200 = £2,850

Step 4 – £15,000 – £2,850 = CT liability of £12,150 (an increase of £750 on the previous tax year)
"

 

[Newchodge]

Don't think the Gov has published the calculations for marginal relief yet.

Atm, lots of people assume the calls will mirror the old provisions before the CT rates merged. If that will be the case, then yes, the marginal CT rate between £50k and £250k will in fact be 26.5%.

Presumably, it is not intended that the first £50,000 of everyone's profit will be at 19%?

 

[free-rider]

Seems to be the case sadly.

 

[tony84]

Good idea but you wouldn't get away with it

Your right. My 5 year old is far too smart, she would move to my mums who would let her stay for free.

 

[UKSBD]

Anything above £50k is 26.5% up to £250k, so it's not like you're going to pay only 19% if you're in between £50k and £250k. My point being is that it's very likely the current corp tax will change for the worse.

Where are you getting your information from?

 

[UKSBD]

This is what current guidance says, to clear any confusion above

Corporation Tax charge and rates from 1 April 2022 and Small Profits Rate and Marginal Relief from 1 April 2023

www.gov.uk

Check the date that was published, a lot has changed since then

 

[Newchodge]

Don't think the Gov has published the calculations for marginal relief yet.

Atm, lots of people assume the calls will mirror the old provisions before the CT rates merged. If that will be the case, then yes, the marginal CT rate between £50k and £250k will in fact be 26.5%. Below is from itcontracting website.


"If we assume that the new system of marginal relief mirrors that used in the 2014/15 and previous tax years, the calculation is as follows:

Step 1 – mutiply your annual profits by the main 25% rate.

Step 2 – subtract your annual profits from the upper threshold (£250,000)

Step 3 – multiply the result of Step 2 by the marginal rate multiplier (3/200)

Step 4 – subtract the result of Step 3 from Step 1 – this is your CT liability for the 2023/4 tax year.

Example 1 – £60,000 annual profits

Step 1 – £60,000 x 25% = £15,000

Step 2 – £250,000 – £60,000 = £190,000

Step 3 – £190,000 x 3/200 = £2,850

Step 4 – £15,000 – £2,850 = CT liability of £12,150 (an increase of £750 on the previous tax year)
"

But that gives a CT liability of 20.25%, not 26.5%.

A 26.5% CT liability on 60,000 would be 15,900, not 12,150

 

[UKSBD]

According to Government guidance on 3rd October it is staying at 19% from April 2023

Corporation Tax rates and allowances

www.gov.uk

Are people here talking about other years?

 

[Newchodge]

According to Government guidance on 3rd October it is staying at 19% from April 2023

Corporation Tax rates and allowances

www.gov.uk

Are people here talking about other years?

That was before Sunak took over. He has reverted to the pre-Truss disaster of 19% for total profit up to 50K, 25% for total profit over 250K and somewhere in between for total profit between 50K and 250K.

The 26.5% is the moan of people whose companies earn say 60,000. They want 19% for the first 50K, but it doesn't work like that.

 

[UKSBD]

That was before Sunak took over. He has reverted to the pre-Truss disaster of 19% for total profit up to 50K, 25% for total profit over 250K and somewhere in between for total profit between 50K and 250K.

The 26.5% is the moan of people whose companies earn say 60,000. They want 19% for the first 50K, but it doesn't work like that.

These government guidelines pages on the .gov.uk site are ridiculous if they leave outdated information online or don't make it obvious that they are out of date.

 

[Newchodge]

These government guidelines pages on the .gov.uk site are ridiculous if they leave outdated information online or don't make it obvious that they are out of date.

You have to have some sympathy - if they had delayed putting up the effect of Truss' decisions, they would have saved themselves a lot of work.

 

[japancool]

You have to have some sympathy - if they had delayed putting up the effect of Truss' decisions, they would have saved themselves a lot of work.

Well, they weren't to know she was useless.

Oh wait, no. EVERYBODY knew she was useless.

 

[free-rider]

But that gives a CT liability of 20.25%, not 26.5%.

A 26.5% CT liability on 60,000 would be 15,900, not 12,150

Marginal CT rate above £50k is in fact 26.5%. The emphacis was on the Word "marginal".

 

[Newchodge]

Marginal CT rate above £50k is in fact 26.5%. The emphacis was on the Word "marginal".

Why use a marginal rate. The rate is 25%. For those whose profits are less than 50K, the rate is 19%.

 

[free-rider]

Why use a marginal rate. The rate is 25%. For those whose profits are less than 50K, the rate is 19%.

Marginal CT rate is important for understanding the true tax cost for business and thus for tax planning.

Business has no way to affect tax rates as these are fixed as you say above (thoughthe effective rate of CT can be anything inbetween 19% and 25% for businesses having profits between 50 and 250k). Whereas the effective rate of tax can be bought down by tax planning.

 

[Newchodge]

Marginal CT rate is important for understanding the true tax cost for business and thus for tax planning.

Business has no way to affect tax rates as these are fixed as you say above (thoughthe effective rate of CT can be anything inbetween 19% and 25% for businesses having profits between 50 and 250k). Whereas the effective rate of tax can be bought down by tax planning.

You mean, rather than earn 60K profit and pay 12,150, leaving nett profit of 47,850, it would be better to limit activity and earn 50K profit, paying 9,500, leaving nett profit of 40.500. Is that what you mean?

 

[free-rider]

You mean, rather than earn 60K profit and pay 12,150, leaving nett profit of 47,850, it would be better to limit activity and earn 50K profit, paying 9,500, leaving nett profit of 40.500. Is that what you mean?

Not at all. You seem to be mixing up tax planning with reduction in business.

The simplest options could be chosing HP or finance lease over operational lease to benefit from Capital Allowances or exploring the advantages of benefits in kind to reduce taxable profit figure.

 

[japancool]

Whereas the effective rate of tax can be bought down by tax planning.

Or by finding several family members to employ and paying them a wage equal to the personal allowance?

 

[free-rider]

Or by finding several family members to employ and paying them a wage equal to the personal allowance?

Just need to ensure that they actually do the work they are being paid for and that "salaries" don't end up back at director's account. Otherwise, these won't be allowed as deduction for tax purposes as not strictly wholly and exclusively for business purpose.

HMRC inspections pick such things up easily.

 

[simon field]

HMRC inspections pick such things up easily.

That’s hilarious! Who on earth told you that?

They can’t even pick up the phone easily ?