On 1 April 2023, the main Corporation Tax (CT) rate was increased from 19% to 25%. A small profits rate of 19% was introduced for companies with profits below £50,000 (the lower limit). Marginal relief was brought in for companies whose profits fall between the lower limit and £250,000 (the upper limit).

For some companies the lower and upper limits will be much lower, and certain companies will be entirely excluded from the small profits rate and marginal relief.

Accounting periods less than twelve months

If your company’s accounting period straddles 1 April 2023 it should be split it into two notional accounting periods – one ending on 31 March 2023 and one starting on 1 April 2023. For example, for a 31 December 2023 year-end there will be two notional accounting periods:

• 1 January 2023 to 31 March 2023; and
• 1 April 2023 to 31 December 2023. 

Only the profits of the second notional accounting period will fall within the new rates. The first notional accounting period will be taxed at 19% under the old rules. The second notional accounting period will be taxed under the new rules. As this is not a 12-month period the upper and lower limits will need to be time-apportioned. In the example above, the lower limit would be £37,671 (275/365 x £50,000) and the upper limit £188,356 (275/365 x £250,000).

Associated companies

The upper and lower limits must be divided by the number of ‘associated’ companies. For example, a company with one associated company will have a lower limit of £25,000 (£50,000 / 2) and an upper limit of £125,000.

Broadly, two companies will be associated if:

• one has control of the other; or
• both are under the control of the same person or persons.

Excluded entirely

Non-resident companies without a permanent establishment within the UK and close investment holding companies are not eligible to use the small profits rate or apply marginal relief and must use the main CT rate regardless of their profit levels. There are a few exceptions to this which can be found by searching GOV.UK.

If you have already filed your CT return using the small profits rate or marginal relief incorrectly, you need to submit an amended company tax return to report the correct rate of tax. We can help you with this.

Tax refunds no longer automatic

HMRC is no longer automatically issuing cheques to refund PAYE overpayments.

It is common for employed taxpayers to get to the end of the tax year and find that they have under- or over-paid income tax via PAYE. These discrepancies are calculated by HMRC at the end of the tax year and a tax calculation letter P800 is sent out to the individual.

Historically, HMRC would issue a cheque to any taxpayers who had received the P800 letter but not claimed their repayment online within 21 days. From 31 May 2024 cheques will no longer be automatically issued and taxpayers need to take action to claim their refund.

You might owe tax or be owed a refund because you:

• were put on the wrong tax code, for example because HMRC had the wrong information about your income;
• finished one job, started a new one and were paid by both in the same month;
• started receiving a pension at work; or
• received Employment and Support Allowance or Jobseeker’s Allowance.

If you have received a letter from HMRC telling you that you have overpaid PAYE, you can apply for a refund online. We can help you with this.