The 2023 Corporation tax changes
– take action, prepare today!
The 2023 Corporation tax changes are on their way. It is always good for businesses to plan ahead, but it is now even more essential due to the changes announced to take effect from 1st April 2023. Most important to note is the main Corporation Tax rise from 19% to 25%.
Start preparing for the 2023 Corporation tax changes today.
The new rate of 25% will be applied to companies with taxable profits above £250,000. For companies with taxable profits below the £50,000 threshold, they will continue to be liable for the current rate of 19% corporation tax, but should this threshold be breached, there will be an increase. For companies who achieve taxable profits of between £50,000 and £250,000 the marginal rate relieve system is brought into play.
There are the usual caveats to this, which can be found on gov.uk website, but all business owners need to be aware, prepared, and informed right now! Whilst you may be thinking you have almost another year, do not forget that this year’s accounts will straddle that period, bringing this year’s profits into play for your next balance sheet.
Visit Gov.UK to read more about these changes
New Corporation Tax rules from April 2023:
For companies with profits in excess of £250,000, the main rate of Corporation Tax will be 25% – this applies to all profits
For companies with profits of £50,000 of less, a rate of 19% will be applicable
For companies with profits between £50,000 and £250,000, the company is entitled to
Marginal Small Companies Relief (MSCR)
So, we have clarified the urgent need for a tax mitigation strategy to be in place, but how easy is it to achieve and what support is out there to help you?
TLPI are experienced in tax, business, pensions, investment strategy and wealth protection. We offer products that can mitigate tax, combine, and protect wealth, provide a vehicle for investment, even into property and create robust succession plans for your business. Whilst doing so, you can continue to grow your business, grow your wealth, and create an enviable legacy for your family.
Bringing down the balance sheet
By reducing the year-end balance sheet, you can save tax, it is as simple as that! There are various strategies that can be employed to do so, one of which is by using a vehicle knows as a Small Self-Administered Scheme, commonly abbreviated to the SSAS
The Small Self-Administered Scheme is a type of pension, but a very powerful pension. The SSAS has been around since the 1970s, created by government to enable business owners greater control over their funds and how they can be used for in alignment with their businesses. Therefore, the SSAS is exclusively available to company directors. By using this as part of your ongoing strategy, you are allowed, within HMRC rules, to combine all your old workplace and private pensions into one pot and take control of them yourself. This means, no more hidden pension company fees, transparency of investments and the ability to make all your pension decisions to specifically suit your aims and goals. By utilising this vehicle, you are also able to invite other key employees and/or family members to join the SSAS and pool pensions, increasing the pot investment power. For each member, their percentage of the pot increases, a win, win for all members.
The strategy options often taken using the SSAS are many, for example, you can loan up to 50% of your total pension pot to your trading company for any valid business purpose. This could be to purchase stock, machinery, or even perhaps buy the business premises. The loan must be paid back into the SSAS at a minimum interest rate of at least 1% above the average market base rate of lending. For some, this is the ideal avenue to gain a cheap loan, also without the rigmarole of filling in bank application forms for loans and paying extortionate fees. However, for some, the value of this strategy is considerably greater. By setting the interest rate of the loan much higher, for example, 10%, you bring down your company’s balance sheet, reducing your tax liability. Your company pays rent to your SSAS for the use of the premises, again bringing down profits. In addition, funds paid to your SSAS by your company are classed as an allowable business expense.
For those savvy enough to understand the potential of creating an all-in-one, lifetime solution, TLPI have created a bespoke and powerful lifetime product. The Lifetime Business Tax Plan has two key elements:
- The Family Investment Company
This is the element that facilitates the purchases of investment assets or holds cash
- The Tax-Exempt Investment Account
This element holds the returns, should investments be made
An Investment Trust Fund is recognised by HMRC as a form of Family Investment Company, which is a standard way of preserving family assets for future generations whilst mitigating any tax.
A company tax exempt saving account, technically known as a Small Self-Administered Scheme (SSAS) is also recognised by HMRC as a standard form of investment savings vehicle for a company.
Why you need a Lifetime Business Tax Plan
The fundamental premise of A Lifetime Business Tax Plan is that it offers the ideal solution for protecting wealth for your business, your retirement, and your legacy, all with optimum tax efficiency and within HMRC rules. As an all-in-one strategy, it facilitates tax savings and investment opportunity, not possible without this innovative plan. The Lifetime Business Tax Plan is the ideal vehicle when planning for 2023 Corporation tax changes.
- By managing your company balance sheet in a tax efficient manner, you can reduce corporation tax and continue a trajectory of healthy growth for your business, yourself, and your family.
- By taking control of your own pension funds, combining them and pooling with others, you have far more power and flexibility to invest, loan to your business, create aligned strategies for all of your funds and ensure your wealth is protect for your family.
- When it comes to inheritance, both elements of the Lifetime Business Tax Plan offer exceptional benefits. The Investment Trust Fund element of the plan means that your company shares, and assets are held in trust for your beneficiaries, whilst the Tax-Exempt Investment Account means assets are ring-fenced outside of your estate.
How can TLPI help?
Our consultants start by learning about YOU. It is important that we understand to learn about your individual situation, your business, family and retirement goals.
By appreciating your aspirations, a plan can be tailored to ensure that you are able to continue or begin your Lifetime Business Tax Plan and create strategies to help you invest, protect and grow in the most tax efficient manner possible, taking into account the upcoming changes to corporation tax liability and thresholds.
TLPI have successfully helped business owners since 2004 with different forms of finance and tax planning related to property investing. We provide a no obligation assessment of your circumstances so there is no reason to not enquire and find out
Read more at Gov.uk – https://www.gov.uk/government/publications/corporation-tax-charge-and-rates-from-1-april-2022-and-small-profits-rate-and-marginal-relief-from-1-april-2023/corporation-tax-charge-and-rates-from-1-april-2022-and-small-profits-rate-and-marginal-relief-from-1-april-2023