Corporation tax rates
The main rate of corporation tax which applies to companies with profits of more than £1.5 million was due to fall by 1% to 25% from 1 April 2011. The Chancellor announced that this will now decrease by 2% to 24%.
The further annual decreases of 1% previously announced with eventually bring the rate to 22% (rather than 23%) by 1 April 2014.
The small companies’ corporation tax rate which applies to companies with up to £300,000 will remain at 20%.
Companies with profits between £300,000 and £1.5 million pay tax at a marginal rate to bring their overall rate to the main rate by the time they have profits of £1.5 million.
In 2010, the Chancellor announced a decrease in the rate of Annual Investment Allowance (AIA – the value of fixed asset additions for which a 100% relief can be claimed in the year of purchase) from £100,000 to £25,000 with effect from April 2012.
The annual writing down allowances also be reduce, from 20% to 18% for the main rate pool and from 10% to 8% for the special rate pool this April.
Tax for small unincorporated businesses
The chancellor announced that the Government will consult on introducing a voluntary cash accounting basis for unincorporated businesses up to the VAT registration threshold, with a view to introducing legislation in Finance Bill 2013.
It will also consult on a simplified expenses system for business use of cars, motorcyles and home.
Finally, the Government will also consult on proposals to introduce a disincorporation relief. The consultation will look at the potential demand for such a relief as well as the practicalities of how it would work.