Budget – 2021 – Reintroduction of Small Profit Rate of Corporation Tax

Update

To balance the need to raise revenue with the objective of having an internationally competitive tax system, the Chancellor today (03/03/2021) announced that the main rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7. In order to support the recovery, the increase will not take effect until 01/04/2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.

Corporation tax rates

Source: HM Treasury - Published 3 March 2021

E3 Consulting View

Nicky Oliver, Director of Property Taxation Specialists E3 Consulting, said “This unexpected reintroduction of the Small Profit rate is a good way to minimise impact on those businesses with lower levels of economic activity whilst ensuring the larger most successful business are paying an appropriate share of tax. These changes together with the extended loss-relief carry back from one to three years will certainly help reduce the tax take on many businesses to enable them to retain cash and invest in their business as we all move forward to a post pandemic world”.