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Corporation Tax

Rates

The corporation tax rates for small and large companies was aligned at 20% from April 2015.. The rates for the three financial years to 31 March 2022 are as follows:

Year beginning 1 April: 2021 2022 2023
Corporate Tax Rate – Ring fenced 19% 19% 19%
Corporate Tax main rate – Non-ring fenced 19% 19% 25%
Corporate Tax small profits rate 19% 19% 19%
From 1 April 2023, the Corporation Tax main rate for non-ring fenced profits will be increased to 25% applying to profits over £250,000. A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief.

Research and Development (R&D)

Small and medium (SME) companies can claim enhanced deductions for expenditure on R&D projects at 230% of qualifying expenditure. Where the deduction is claimed and the company makes a loss, it can claim a cash credit from HMRC of 14.5% of that loss.

Research and Development Expenditure Credit (RDEC) scheme

Large companies can claim a 13% uplift on the following qualifying expenditure:

  • Staffing costs
  • Expenditure on externally provided workers
  • Software and materials
  • Contributions to independent research
  • Subcontractors of qualifying bodies and individuals/partnerships

RDEC differs from the previous R&D scheme for large companies as it is an 'above the line' tax credit and can be accounted for in the profit/loss statement.

Enterprise Zones

Around 53 enterprise zones have been formed around the country to encourage investment and job formation. Businesses in some of those zones can claim 100% capital allowances on the equipment they use within the zone. The period for which those 100% allowance are available has been extended by three years to 31 March 2020.

Super Deduction

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

  • a 130% super-deduction capital allowance on qualifying plant and machinery investments
  • a 50% first-year allowance for qualifying special rate assets

See our helpsheet an introduction to capital gains tax.