Corporation tax rates and the impact of a reduction in the small companies rate
| Profits | ||
| Year to | First £300,000 | Over £1.5m |
| 31/3/11 (FY2010) | 21% | 28% |
| 31/3/12 (FY2011) | 20% | 27% |
| 31/3/13 (FY2012) | 20% | 26% |
| 31/3/14 (FY2013) | 20% | 25% |
| 31/3/15 (FY2014) | 20% | 245 |
Any reduction in the small companies rate is welcome, but yet again there is no move to increase the profit level of £300,000 to which the lower rate applies - that last went up in 1994!
A fresh look needs to be taken when considering how to distribute profits of a limited company, given the increases in the rate of income tax and NIC's and the small reduction in the corporation tax rate for small companies.
What is clear is that the overall saving in distributing profits as dividends instead of as a remuneration is widening, and indeed encourages a fresh look at incorporation where the annual tax savings will be even greater than before (quite apart from the ability to sell the goodwill to the limited company and obtain a one-off tax saving). That is surprising given the previous Government's stated dislike of "tax-inspired" incorporations - a view which is not likely to be any different with the Coalition Government.
As there is a review about to start on the overall tax regime for small businesses, it makes sense to consider your options now. By the way the review promises to include a look at the notorious IR35 legislation which can apply where services are provided via a personal service company. Hopefully there will be good news in the not too distance future.
For more information please contact Katie Smith on 01932 584 787 or email k.smith@wtca.co.uk.