Corporation Tax
Rate of tax
The government has published a Corporation Tax Roadmap in which it is committed to capping the main rate at 25% and maintaining the small profits rate and thresholds, as well as key features such as full expensing, Annual Investment Allowance, Research & Development relief rates, and the Patent Box. This appears to be a commitment for the whole life of this Parliament.
The main rate of 25% applies to companies with profits over £250,000. The ‘small profits rate’ remains 19% for companies with profits of up to £50,000. Between £50,000 and £250,000 there is a tapering calculation that produces an effective marginal rate of 26.5% on profits between these limits, but an average rate on all profits of between 19% and 25%. The limits are divided between companies that have been under common control at any time in the previous 12 months, whether UK resident or not (subject to certain exceptions, such as dormant companies).
Capital allowances for plant and machinery
In 2023, ‘full expensing’ (100% relief for the cost in the year of purchase) was introduced for most plant and machinery. It is not currently available to companies that buy plant to lease out to other businesses. In March 2024, Jeremy Hunt announced that ‘the government will seek to extend full expensing to leased assets when fiscal conditions allow’; the October 2024 Budget includes almost identical wording, but no specific date.
The government will extend for a further year the 100% first year allowances for qualifying expenditure on zero-emission cars and plant and machinery for electric vehicle charge points. These will continue to be available to 31 March 2026 for corporation tax and 5 April 2026 for income tax.