T: 023 9351 0435
E: info@matchaccounting.co.uk

Corporation Tax Changes from 2023: Plan Ahead

Companies currently pay corporation tax on their profits at a rate of 19%, regardless of the level of those profits. While this will not increase in 2022, new rules come into effect from 1 April 2023 and, for some companies, the rate of corporation tax will rise to 25%.


The new regime


From 1 April 2023 the rate at which companies pay corporation tax will depend on the level of their profits.

The main rate of corporation tax will increase to 25% for companies whose profits exceed the ‘upper profits limit’, set at £250,000.

Companies whose profits do not exceed the ‘lower profits limit’, set at £50,000, pay corporation tax at the ‘small profits rate’, which remains at the current corporation tax rate of 19%.

Companies whose profits fall between the limits (£50,000 – £250,000) will pay corporation tax at the main rate, reduced by marginal relief. This provides a gradual increase in the rate of corporation tax as profits increase up to the upper profits limit of £250,000.

The profit limits are reduced proportionately where the accounting period is less than 12 months, or where a company has one or more associates.


Associated companies


The upper and lower profits limits are proportionately reduced to take account of the number of associated companies that the company has, with each limit being divided by N + 1, where N is the number of associated companies.

The impact of this is shown in the following table for those with up to five associated companies.

Number of associated companies

Upper profits limit Lower profits limit





£125,000 £25,000










5 £41,667


Companies are associated with each other if one is under the control of the other or both are under the control of the same person or persons.

Here, ‘control’ means 51%. When determining whether a person has control of a company, the rights and powers of their associates (which includes their spouse or civil partner and business partners) are taken into account.

A company counts as an associated company in the calculation if it is associated for any part of the accounting period, even if only for a number of days. An associated company would be ignored if it has not traded while associated in the accounting period.


Accounting period spans 1 April 2023

Where the accounting period spans 1 April 2023, the profits within the financial year 2022 are taxed at 19%, and profits within the financial year 2023 are taxed at the appropriate rate with the upper and lower profits limits being proportionately reduced.


Planning ahead

There is time to plan ahead to mitigate the impact of the changes. For example:


  • If possible, where profits exceed the lower profits limit, could profit be accelerated so that they are taxable in the financial year 2022, rather than after 1 April 2023.
  • Where the effective rate of corporation tax after 1 April 2023 is more than 19%, delay expenses to secure relief at a higher rate.
  • Where losses are made, consider whether it would be more beneficial to carry them forward rather than carry them back. The trade-off is between later relief, potentially at a higher rate or earlier relief (or repayment), but at a lower rate.
  • Consider the impact of associated companies and whether restructuring would be beneficial.
  • Give careful consideration between the interaction of the new Super Deduction for Capital Allowances which could give rise to a higher tax charge when/if the asset was sold.



MATCH is working hard to keep on top of all the latest news and government support so, as always, feel free to get in touch if you have any queries and we’ll be happy to help.


MATCH Accounting Limited