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Tax Rates & Allowances

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Corporation Tax

Rates

The rates for the three financial years from 1 April  2021 are as follows:

Year beginning 1 April: 2021 2022 2023 2024
Corporate Tax main rate  19% 19% 25% 25%
Corporate Tax small profits rate N/A N/A 19% 19%
Marginal relief lower profit limit N/A N/A £50,000 £50,000
Marginal relief upper profit limit N/A N/A £250,000 £250,000
Standard fraction N/A N/A 3/200 3/200
Main rate (all profits except ring fence profits) 19% 19% N/A N/A

From 1 April 2023, the Corporation Tax main rate applies to profits over £250,000, and the small profits rate applies to profits of up to £50,000. Those thresholds are divided by the number of associated companies carrying on a trade or business for all or part of the accounting period.   Companies with profits between £50,000 and £250,000 pay tax at the main rate reduced by a marginal relief determined by the standard fraction and this formula:

formula

Where:

F = standard fraction

U = upper limit

A = amount of the augmented profits

N =amount of the taxable total profits 

For companies with ring fence profits from oil or gas related activities, the main rate is 30%, and the small profits rate is 19%, with a ring fence fraction of 11/400, for all financial years from 2008.

Research and Development (R&D)

Small and medium (SME) companies can claim enhanced deductions for expenditure on R&D projects at 186% (230% before April 2023) of qualifying expenditure. Where the deduction is claimed and the company makes a loss, it can claim a cash credit from HMRC of 10% of that loss from 1 April 2023, previously 14.5%.  Where the SME spends at least 40% of their total expenditure on qualifying R&D from 1 April 2023, it can claim the higher payable tax credit of 14.5%.   

Each R&D project must be carried on in a field of science or technology and be undertaken with an aim of extending knowledge in a field of science or technology.

Research and Development Expenditure Credit (RDEC) scheme

Large companies can claim an extra 20% deduction from 1 April 2023 on the following qualifying expenditure:

  • Staffing costs
  • Expenditure on externally provided workers
  • Software and materials consumed or transformed
  • Utilities but not rent
  • Payments to clinical volunteers
  • Subcontractors of qualifying bodies and individuals/partnerships

For staff working directly on the R&D project, you can claim for the following costs, as long as they relate to R&D:

  • Bonuses
  • Salaries
  • Wages
  • Pension fund contributions
  • Secondary Class 1 National Insurance contributions paid by the company

RDEC differs from the previous R&D scheme for large companies as it is an 'above the line' tax credit and can be accounted for in the profit/loss statement.