When? – From 1st April 2023
Who does it affect?
- Limited Companies with profits above £50,000
- and/or Limited Companies that have associates ** See Note
** Note: A company is an ‘associated company’ of another company if one of the two has control of the other, or both are under the control of the same person or persons. For example –
- if you and a spouse each have a company, and you are both shareholders of each other’s companies, then your companies may be associated, or
- if you are a controlling shareholder in a number of different companies, then all of those companies will be associated or
- if a companys shares are held by a holding company that also holds shares in another company, then those companies are associated
There are various factors that determine control including majority shareholding and voting rights held either directly or indirectly through family members. Financial, economic, or organisational interdependence will also impact on whether the companies are deemed to be associated.
What is changing?
- Companies with profits below the ‘lower limit’ will continue to pay tax at 19% .
- Companies with profits above the ‘upper limit’ will pay tax at 25%.
- Those with profits that are in between these limits, tax will be payable at 25% with a
marginal relief provided.
Upper and Lower Limits
The lower limits and upper limits are £50,000 and £250,000 respectively, but these limits are divided by the number of associated companies.
Case Example:
Company A has another 1 associate then the total number of companies is 2 and the limits are divided by this number – so the lower limit becomes £25,000 and the higher limit becomes £125,000 and the companies will pay tax at 25% on profits above £125,000.
Are you a shareholder in more than one company (and we don’t act for all companies)? Do you believe these changes will apply to you?
If you need any assistance or would like to talk to one of the team, please contact us using the contact form on our website.
