Corporation tax – another record year, with more to come?
26 September 2023
Many people will know that UK companies pay corporation tax on their profits, so the total amount paid is an important measure of the health of the UK economy. Over the last decade, corporation tax has accounted for around 8% of total UK tax receipts. This is significantly less than income tax and NIC but is still an important source of revenue for the government.
On Thursday last week, HMRC published its corporation tax statistics for the year to March 2023, which showed that £84.7bn of corporation tax was collected in the year. This represented a steep increase of 26% on the previous year and is the highest amount ever collected in a single year.
The rate of growth is slightly lower than the 28% jump that was seen in the year to March 2022 but the headline figures hide some important themes that we expect will play out in the coming months.
Firstly, the jump in the year to March 2022 was the result of the immediate bounce back in corporate activity following the Covid-19 lockdowns. Measured against that year, the March 2023 outturn looks impressive, particularly in view of the macro-economic headwinds and interest rate increases that have buffeted the UK in recent months.
Secondly, the result is even more impressive given that the rate of corporation tax remained at 19%, but companies were also able to benefit from a full year of the capital allowances ‘super-deduction’.
That ‘super-deduction’ was a corporation tax giveaway announced in the 2021 Spring Budget by former chancellor Rishi Sunak, as “the biggest business tax cut in modern British history”.
So, the continued growth in corporation tax receipts in the year to March 2023 looks like an impressive performance and shows that the UK corporate tail is still wagging.
But, as always, the future is more important than past and, for businesses, the sting in the tail of the 2021 Spring Budget is still to be felt. During the same speech, it was announced that the corporation tax rate would increase from 19% to 25% in April 2023.
That increase has now arrived, despite attempts by the short-lived Truss administration to reverse course, so UK companies are now subject to a much stiffer tax rate on their profits than in recent years.
In a further blow, the corporation tax rate increased at the same time the super-deduction was withdrawn, so UK companies are now facing a double whammy of a higher tax rate with fewer tax reliefs available.
In March 2023, the OBR predicted that these changes will “deliver the highest level of onshore corporation tax receipts on record”. All this should mean that next year’s corporation tax figures will be even more interesting and are likely to show a further increase.
In the meantime, businesses should continue to take advantage of the reliefs that remain within the corporation tax regime and watch out for any changes in the upcoming Autumn Statement on 22 November.
On Thursday last week, HMRC published its corporation tax statistics for the year to March 2023, which showed that £84.7bn of corporation tax was collected in the year. This represented a steep increase of 26% on the previous year and is the highest amount ever collected in a single year.
The rate of growth is slightly lower than the 28% jump that was seen in the year to March 2022 but the headline figures hide some important themes that we expect will play out in the coming months.
Firstly, the jump in the year to March 2022 was the result of the immediate bounce back in corporate activity following the Covid-19 lockdowns. Measured against that year, the March 2023 outturn looks impressive, particularly in view of the macro-economic headwinds and interest rate increases that have buffeted the UK in recent months.
Secondly, the result is even more impressive given that the rate of corporation tax remained at 19%, but companies were also able to benefit from a full year of the capital allowances ‘super-deduction’.
That ‘super-deduction’ was a corporation tax giveaway announced in the 2021 Spring Budget by former chancellor Rishi Sunak, as “the biggest business tax cut in modern British history”.
So, the continued growth in corporation tax receipts in the year to March 2023 looks like an impressive performance and shows that the UK corporate tail is still wagging.
But, as always, the future is more important than past and, for businesses, the sting in the tail of the 2021 Spring Budget is still to be felt. During the same speech, it was announced that the corporation tax rate would increase from 19% to 25% in April 2023.
That increase has now arrived, despite attempts by the short-lived Truss administration to reverse course, so UK companies are now subject to a much stiffer tax rate on their profits than in recent years.
In a further blow, the corporation tax rate increased at the same time the super-deduction was withdrawn, so UK companies are now facing a double whammy of a higher tax rate with fewer tax reliefs available.
In March 2023, the OBR predicted that these changes will “deliver the highest level of onshore corporation tax receipts on record”. All this should mean that next year’s corporation tax figures will be even more interesting and are likely to show a further increase.
In the meantime, businesses should continue to take advantage of the reliefs that remain within the corporation tax regime and watch out for any changes in the upcoming Autumn Statement on 22 November.
