Small companies

Companies with profits above £50,000 will pay more CT, as the main rate of 25% will be charged subject to marginal relief on profits in the band £50,000 to £250,000. This needs to be budgeted for when calculating how much the directors can draw from the company in the form of dividends as opposed to salary.

The dividend allowance will be cut to £1,000 from 6 April 2023 and cut it again to £500 in April 2024. The rates of dividend tax are not being changed, as far as we know, but there will be another Budget statement in March 2023.

In 2023/24 the dividend allowance cut will cost a basic rate taxpayer £87.50, a higher rate taxpayer £337.50 and an additional rate taxpayer: £393.50, assuming they would otherwise use the allowance in full. However, the greater impact will be on family companies where minority shareholders receive just enough dividends from their shares to be covered by the dividend allowance.

The R&D tax relief scheme for SME companies will be cut back significantly for expenditure incurred from April 2023 onwards. The additional R&D expenditure deduction is reduced 130% to 86%, and the payable tax credit reduced from 14.5% to 10%. HMRC will also ask for companies more information about their R&D claim, if they have not claimed under that scheme before, as we set out on 1 September 2022.

The Chancellor confirmed that the super deduction capital allowances (at 130% or 50%), available to companies only, expire on 31 March 2023. However, most companies will be able to use the AIA to cover their capital expenditure, as that cap remains at £1 million per year.

R&D tax relief reform

Autumn statement para 5.52

This information is taken from the weekly Tax Tips, published by the Tax Advice Network, for which you can subscribe at www.TaxAdviceNetwork.co.uk