Small business owners: Corporation tax is changing from April 2023
The Corporation Tax rate for small businesses in the UK is set to change in April 2023, with the current rate of 19% set to rise to 25%. This increase is part of the government's plan to boost the economy and raise revenue, but it will have a significant impact on small business owners.
Small businesses will need to review their financials and determine if they will be able to absorb the additional tax burden or if they will need to adjust their business model to remain profitable. If the increased tax bill will make it difficult for your business to remain profitable, you should start exploring options for reducing your taxable income now.
Here are some steps small business owners can take to prepare for the corporation tax increase:
Review your expenses: Look at your business expenses and determine which are necessary and which can be reduced or eliminated. You can also consider changing suppliers to reduce costs, negotiating better terms with existing suppliers, or looking for alternative suppliers.
Rethink your pricing strategy: If you're selling products, you may need to increase prices to cover the additional tax burden. If you're selling services, consider offering bundled packages or reduced rates for repeat customers to increase revenue and profitability.
Evaluate your business structure: Consider changing your business structure to reduce your taxable income. For example, you may be able to form a limited company or switch to a sole trader or partnership structure.
Make use of tax reliefs and allowances: There are various tax reliefs and allowances available to small businesses that can help reduce your taxable income. These include research and development tax credits, capital allowances, and the employment allowance. You should consult a tax advisor to determine if any of these apply to your business.
Consider alternative sources of funding: If you're struggling to pay the additional corporation tax, consider alternative sources of funding such as loans, grants, or investment. You may also be eligible for government support programs designed to help small businesses.
Profit between £50,000 and £250,000?
It's important to note that for businesses with profits between £50,000 and £250,000, the corporation tax rate will be subject to a marginal rate. This means that the tax rate will gradually increase based on the level of profits, rather than a flat rate of 25%. The exact marginal rate will depend on the level of profits, and it's crucial that small business owners understand how this will impact their business and plan accordingly.
We can help
The upcoming change in the corporation tax rate will significantly impact small business owners in the UK. While it may seem daunting, there are steps you can take to prepare and minimize the impact on your business.
By reviewing your expenses, pricing strategy, business structure, making use of tax reliefs and allowances, and considering alternative sources of funding, you can ensure your business remains profitable and sustainable.
However, navigating these changes can be complex and time-consuming. That's where a professional accountant and tax advisor like Mirandus can help. We have the expertise and experience to provide tailored advice and support to help your business weather the tax increase and achieve its goals.
