We have been preparing a number of company accounts and company tax returns for the limited companies of our clients with company tax years ending post April 2017. These clients are now starting to feel the benefit of the reduced corporation tax rate. Yes that’s right, you may have missed it but the corporation tax rate for limited companies was reduced by Government with effect from 1 April 2017 and further reductions to this tax rate or planned in the coming years.
What are the changes to the Corporation Tax Rate?
The UK Government reduced the corporation tax rate which applies to limited companies down from 20% to 19%. This change took effect on 1 April 2017.
All limited companies with an accounting year ending after April 2017 will start to feel the benefit of this reduction in tax. We have already completed company tax returns for a number of clients who were pleasantly surprised to see that the corporation tax due was less than what they had expected, with many clients still expecting and planning for a corporation tax take of 20%.
What future changes are expected?
The UK Government announced during the Summer Budget of 2015 that they would reduce the corporation tax rate down further to 18% starting from 1 April 2020. This is further good news for the owners of limited companies.
However, the most recent plans here are even better as the UK Government subsequently announced during the 2016 Budget that they will reduce the corporation tax rate even further to 17% from 1 April 2020.
This is great news for all clients who operate a limited company and adds further weight to support the decision of choosing the limited company structure.
We’ll certainly keep you on top of any changes here regarding future plans for the corporation tax rate so watch this space for future updates and we will also add a blog post each year when the new change is implemented as a gentle reminder.