You work hard to make your business successful, so you want to make sure you are retaining as much of your income as possible.

But how can you and your business minimise tax liabilities?

This new tax year presents a chance to get off on the right foot, by staying up-to-date with the latest changes and ensuring you have the right strategies in place.

With a number of tax increases and changes to business tax reliefs now in force, you need to consider whether you are making the most of any tax-saving opportunities.

Corporation Tax increase

For most profitable businesses, the main rate of Corporation Tax increased to 25 per cent from 1 April 2023.

The tax rate you are charged will depend on your company’s taxable profits.

If your company has profits up to £50,000, you will pay Corporation Tax at 19 per cent.

Whereas if your profits are £250,000 and over, you will need to pay the 25 per cent rate.

If your business’ profits lie between £50,000 and £250,000, you will be charged a Corporation Tax rate on a sliding scale between 19 per cent and 25 per cent.

In the case that your business’ profits are between these thresholds, you could benefit from the marginal rate relief which allows you to reduce the rate of Corporation Tax you pay on a gradual scale.

How can you plan ahead?

Make use of Capital Allowances

Whilst the super deduction has ended, the Chancellor announced the introduction of full expensing in the Spring Budget.

This allows you to write off the full cost of any qualifying plant and machinery. This will apply to expenditures on or after 1 April 2023 and before 31 March 2026.

The full expensing measure is equal to a 100 per cent first-year allowance

You can also take advantage of the Annual Investment Allowance (AIA) which enables you to deduct 100 per cent of the cost of any qualifying plant and machinery from your profits. You can claim up to £1 million per year.

Writing Down Allowances (WDAs) enable you to deduct a percentage of the value of qualifying items from your annual profits. You can claim 18 per cent for main rate expenditure and 6 per cent for special rate expenditure.

Be aware of the R&D reforms

To qualify for research and development tax credit, you must be carrying on a project that seeks an advance in science or technology. This tax relief can either reduce your company’s tax bill, or for some companies provide a cash sum.

But, if this applies to you, you need to be aware of the R&D reforms that came into force on 1 April 2023.

Under the new reforms, you must submit a pre-notification to HMRC digitally.

This applies if your business is a new claimant or if you have not claimed the relief in the last three financial periods.

There are also new rates of relief, which are as follows:

  • The additional deduction rate for the SME scheme has reduced from 130 per cent to 86 per cent– to make a new total deduction rate of just 186 per cent
  • The SME credit rate is now 10 per cent
  • The RDEC rate has increased from 13 per cent to 20 per cent

The Budget announced some last-minute changes to the research and development reforms that you need to get to grips with.

A new reform to support loss-making R&D-intensive businesses, known as an ‘enhanced credit’ came into effect on 1 April 2023.

If you are eligible, you can claim a rate of 14.5 per cent in comparison to the standard 10 per cent rate.

Ensuring your business retains its income is a complex matter and you seeking expert advice on any available reliefs is essential.

Need advice on optimising your business’s finances? Contact our team today.

Posted in Advisory Insights, Blog, Blogs, Business, Corporation Tax, R&D, SME, Tax.