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As the end of the tax year and also the end of many companies’ financial years approach now is a good time to be reminded of a few recent changes in tax rates and allowances which affect limited companies.

Corporation tax rates

As many will be aware the main Corporation Tax rate was increased to 25% from 1 April 2023 so the current year to 31 March 2024 will be the first full year affected by this.  Remember that not everyone will be affected by this because if company profits are below £50,000 the original rate of 19% will still apply.  If your profits are between £50,000 and £250,000 a marginal rate of 26.5% will apply to the excess over £50,000 so that the effective rate on total profits will be somewhere between 19% and 25%.  It is only if your profits are more than £250,000 that the rate will be the full 25%.

Capital allowances

Sadly the “super deduction” allowance” of 130% came to an end on 31 March 2023 but there is a new category of first year allowance which extends the range of allowances available for capital expenditure.  The main allowances are now:

Annual Investment Allowance – 100% relief for all expenditure on all qualifying plant and machinery up to £1,000,000 in a year

First Year Allowance – 100% relief on expenditure on new (not used) plant and machinery with no upper monetary limit, including on electric cars and vans.  This excludes special rate expenditure on which there is a 50% allowance which covers things like cars (non-electric), integral features in buildings, and long life assets

The above is just a summary of the headlines and there a lot of underlying rules governing eligibility in particular circumstances and for particular expenditure so if you are considering any significant capital expenditure it is advisable to talk to us first so that you can be sure of the tax implications.

Please contact us if you would like to carry out a pre-yearend review of your company’s tax position.

The above summary is for information purposes only, based on the tax measures in place at the time of issue, and should not be relied on without taking further professional advice