As you may know, from 1 April, the corporation tax rate increased from 19% to 25% for companies with taxable profits over £250,000.
Companies with taxable profits of less than £50,000 will continue to pay tax at 19%.
However, companies with profits between £50,000 and £250,000 will be eligible for marginal relief.
A change in your accounting period could markedly reduce your tax bill.
All companies with significant profits and chargeable gains should at least consider whether it will be beneficial to implement this change.
Should I change my company’s year-end?
If your business tends to have cyclical profits and/or there is likely to be a large gain in an accounting period that will include 1 April 2023, it might be sensible to contemplate a change to your year-end.
For example, with an accounting period ending 30 September 2023, the effective tax rate across the whole year would include the new rate as well as the current rate, leading to higher tax contributions overall.
However, if the company changed its year end to 31 March 2023, it would only pay tax at 19%.
There may also be opportunities to make savings by extending accounting periods.
For instance, a company with a December year-end which makes a £2m gain on 20 April 2023 could significantly improve their tax position by extending the accounting period to 20 April 2023.
This is because there would only be 20 days of apportionment for the 25% rate.
However, before making any changes to your year-end, you should always consult an expert.
How we can help
At Williamson & Croft, we support an eclectic mix of businesses and private individuals across several sectors with a wide range of services to ensure compliance with statutory and financial reporting.
Our goal is for you to have the necessary advice to make an informed decision on your tax affairs, ensuring that they are as efficient as possible, while remaining fully compliant.
Our team provide clear, concise advice and aim to mitigate the stress and risks of operating a business as much as possible.
Contact us today to find out more.