Kirby & Haslam

Prepare Now for the Challenging Corporation Tax Rise


The ‘growth plan’, set out by the then Chancellor, Kwasi Kwarteng, on the 23rd of September 2022, included a number of substantial tax announcements but two of these have now been reversed. On the 14th of October, the Prime Minister announced a return to the previously planned increase in the corporation tax rate to 25% from April 2023. This followed an earlier announcement of the reversal of the planned abolition of the 45% top rate of income tax from the 6th of April 2023.

However, with these changes also comes changes to R&D Tax Credits, the scope has widened and this means that more businesses can claim this tax relief. This relief will become more valuable, increasing to 32.5% of qualifying expenditure, when the main rate of corporation tax in the UK rises to 25% from 1 April 2023.

With the go-ahead of the increase to corporation tax which had been previously rejected, we take a look at the challenges ahead, and how we can help you prepare.

What Was Supposed to Happen?

Former Chancellor Rishi Sunak had intended to raise the corporation tax to 25% in April 2023. However, this was rejected by the recently fired Chancellor and effectively froze the rate at 19% allowing companies to retain more profit. The changes were being made in an effort to “support investment, innovation and economic growth.”

What is Happening With Corporation Tax Now?

The pound fell in value dropping to lower than the US dollar and the cost of government borrowing and mortgages also increased. This pressure compelled Liz Truss and her government to reverse the mini-budget in what is being called a ‘U-turn’ on corporation tax.

The government will no longer proceed with the planned cancellation of the corporate tax rate increase. Instead, it will go ahead with the previously planned increase of the rate to 25% in April 2023. The 19% rate will continue to apply to companies with profits of not more than £50,000, with marginal relief for profits up to £250,000 as originally planned.

What Happens Next?

At the time of writing, no additional changes to the tax announcements made during the Fiscal Event were announced, but with the appointment of the new Chancellor, additional changes are possible. According to the Prime Minister, the publication of the Office for Budget Responsibility’s forecast and a new medium-term fiscal plan will occur as planned at the end of October.

With a 25% corporate tax rate, the UK’s corporate tax regime will remain competitive and supportive of growth. A tax review will be conducted by the government as part of an effort to promote growth and investment through the tax system.

It’s crucial for businesses to start planning now for these changes – and of course, paying more tax also means you will gain more benefit from any relief available. Find out how we can help reduce your Corporation Tax here!

To Recap:

  • A low tax, high wage, and high growth economy is the Government’s mission, according to the Prime Minister.
  • Corporation Tax rates will increase from 2023, with the new small profit rate benefitting most small businesses.
  • In the Medium-Term Fiscal Plan, which is due to be delivered by the Chancellor on 31st October, Hunt outlines how debt will be reduced over the next three years as a percentage of GDP.
  • In response to concerns over unfunded tax cuts announced by the government in its now infamous mini-budget, the government has raised £18 billion in extra tax revenue through an increase in corporation tax from April 2023.
  • Research and Development Tax Credits are one of the best ways to reduce your Corporation Tax bill

With the challenges ahead, we are here to make your claim run as smoothly as possible. Kirby and Haslam are experts in writing technical reports for your R&D claim. We will document your claim for you in an R&D Technical report, explaining how your activities qualify for R&D tax relief. The technical report will describe why the project was undertaken, the scientific/technological problem you were looking to solve, and how it meets the legislation – find out more here.