Government confirms corporation tax rates remain at 25% for large companies, providing planning certainty for businesses.
Following the Spring Budget 2024, the government has confirmed that corporation tax rates will remain stable, providing certainty for businesses planning their financial strategies. The main rate continues at 25% for companies with profits over £250,000, ensuring predictable tax obligations for medium-sized businesses.
The decision to maintain corporation tax rates at current levels provides valuable certainty for medium-sized companies. Businesses with profits exceeding £250,000 can continue with their existing tax planning strategies, knowing that the 25% rate will remain stable, allowing for more accurate financial forecasting and investment decisions.
With stable corporation tax rates, businesses can focus on long-term tax efficiency strategies and take advantage of available reliefs and allowances:
Take advantage of the Annual Investment Allowance which remains at £1 million until March 2026. This provides excellent opportunities for tax-efficient capital investment while benefiting from the stable 25% corporation tax rate.
Review the balance between salary and dividends for owner-managers. With higher corporation tax rates, the optimal mix may shift, particularly considering the dividend tax rates and personal allowances.
Companies with multiple entities should review their group structure. Spreading profits across group companies might help maintain some profits in the lower tax bands, though anti-avoidance rules must be carefully considered.
The enhanced deductions for R&D expenditure become more valuable with higher corporation tax rates. Companies should ensure they're claiming all available reliefs and consider whether activities qualify for R&D tax credits.
Different sectors will be affected differently by these changes:
Tech companies with high R&D expenditure may benefit from enhanced reliefs. Patent Box regime continues to offer 10% rate on qualifying IP profits.
Capital-intensive businesses should maximize Annual Investment Allowance before rates increase. Super-deduction may not return in current form.
Service businesses with lower capital requirements should focus on profit extraction strategies and timing of income recognition.
Businesses in these sectors should consider timing of property investments and review business rates relief eligibility extending to March 2026.
March 31, 2025: Last day to benefit from 25% rate for year-end companies
April 6, 2025: New 28% rate takes effect
January 31, 2026: First CT600 returns due under new rates
Given the significance of these changes, we recommend that medium companies take the following actions:
Schedule a comprehensive review of your current tax position and projected profits for 2025/26.
Evaluate planned capital expenditure and consider bringing forward investments to benefit from lower rates.
Update cash flow projections to account for increased corporation tax liabilities from April 2025.
Engage with tax professionals to develop a tailored strategy that maximizes available reliefs and minimizes the impact of rate increases.
These corporation tax changes will significantly impact medium companies. Our tax specialists can help you navigate the new landscape.
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Our experienced tax team can help you navigate these changes and optimize your tax position.