When the current Prime Minister was Chancellor, he announced that there would be an increase in the main corporation tax rate to 25%. This would apply to profits above £250,000 and begin from the 1st of April 2023. Although under the previous administration, this decision was reversed, the 25% will now still apply next year.
With the corporation tax changes in mind, businesses with annual profits up to £50,000 will continue to pay at the small profits rate of 19%. Those with a total profit between £50,000 and £250,000 will pay 19% on the first £50,000 and a marginal rate of 26.5% on the remaining amount.
How Will The Changes Impact Contractors?
There has been an unfavourable update to off-payroll working rules for contractors who work through their own personal service companies. While the previous administration vowed to repeal these rules, they will now remain in place. The rules state that all large private-sector businesses and all public-sector bodies must decide whether the contractors they engage with should be taxed as employees under the IR35 rules. Unfortunately, any agencies or intermediaries in the hiring chain are not taken into account when making this decision.
Contractors can ask their ultimate customers whether they are classed as a large company. Those who work for a small or medium-sized business can decide whether the IR35 rules apply to the contract.
As always, we can help you to decide whether the IR35 rules apply to your contracts, so please contact us to book an appointment.