Corporation Tax

Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate. The main rate is 25% and the small profits rate (companies with profits under £50,000) is 19%.

Calculation of the taxable income broadly follows the rules for individuals except that:

1. From 6th April 2020 non-resident companies of which the income is derived mainly from UK property have been subject to UK Corporation Tax in the same way as UK companies.
2. Transactions occurring outside the UK and relating to non-UK assets by a non-resident company are outside the scope of UK tax. UK resident companies are subject to Corporation Tax on income and gains wherever in the world they occur. The tax treaties may go some way to reducing the tax due if a transaction has been taxed overseas.
3. Gains arising on disposals by companies are subject to Corporation Tax.
4. The S24 loan interest relief restriction does not apply to companies.

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Annual Tax on Enveloped Dwellings (ATED)

Applies to residential properties held by non-natural persons and is subject to numerous exemptions and reliefs.

Property value	2023-24	2024-25
£0 – £500K	N/A	N/A
£500K – £1m	£4,150	£4,400
£1m – £2m	£8,450	£9,000
£2m – £5m	£28,650	£30,550
£5m – £10m	£67,050	£71,500
£10m – £20m	£134,550	£143,550
Over £20m	£269,450	£287,500

• For 2024-25 the bands are the value ranges as at 1st April 2022.
  For example if the house was worth £1.9m in April 2017, the 2022-23 tax would be £7,700; if the same house had gone up in value since 2017 and was worth £2.1m as at 1st April 2022, then the tax for 2024-25 would be £30,550 (payable by 30th April 2024). That is because relevant properties are valued once every five years.
• There are numerous reliefs, including where the property has been let commercially. To claim a relief the owner MUST claim this relief on an ATED Relief Declaration Return, which must be submitted annually.

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Note

1. When a director/shareholder draws money from a UK company, there are only four types of withdrawal permitted:
   1. Repayment of a loan previously made to the company
   2. Reimbursement of expenses incurred on the business of the company
   3. Dividend
   4. Salary or bonus
      
      Dividend, salary, and bonuses are taxable in the hands of the recipient at the prevailing rates. While the salary or bonus may reduce the profit subject to Corporation Tax, a dividend does not. Salary and bonuses may be subject to National Insurance Contributionss. Payment of salary or bonus will require the creation of a PAYE scheme.
      
2. A company does not enjoy the Personal Allowance for individuals, nor does it enjoy the annual exempt amount for Capital Gains.

For help with this or any other taxation matter, get in touch

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