Corporation Tax to increase after 2023

5th March 2021

In the 2021 Spring Budget, the Chancellor announced that Corporate Tax will increase after 2023 to 25%. This will not affect the smallest companies; the existing rate will apply to those with profits of less than £50,000 a year.

For the most profitable companies in the UK this change is unlikely to cause a problem – these large organisations typically don’t struggle to pay tax. But for SMEs, it means that business owners may now need to look at how they can secure the company’s wealth in the long-term.

This could potentially be achieved by:

  • Taking out business protection insurance
  • Insuring key people in the organisation
  • Considering property insurance

For those businesses sitting on the border of having to pay Corporation Tax at the higher threshold, it is worth using company profit on some of the above options. These will count as an ‘expense’ for businesses, and therefore reduce profits (on the balance sheet, at least) so the company doesn’t have to pay the higher tax threshold. This saves money for the organisation in the long run.

If this is a concern for you, I highly recommend speaking to your accountant or financial adviser. Equally, accountants and financial advisers should be encouraging business owners to do this!