The end of the Super deduction tax… and the start of Corporation Tax changes

28 March 2023

In a bid to encourage businesses to start investing in their productivity after the pandemic, a super deduction tax was announced as part of the 2021 budget update.

The super-deduction saw businesses benefit by:

  • First-year relief of 130% on qualifying main rate plant and machinery investments until 31st March 2023.
  • A 50% first-year allowance (FYA) for special rate (including long-life) assets.

The super-deduction gave businesses a strong incentive to make additional investments and bring forward any planned spend.

Like all good things, the super-deduction is coming to an end. With a confirmed end date of 31st March 2023, limited companies should maximise this benefit before it is no longer available.

To qualify for the super deduction tax any spend on qualifying plant & equipment must be made, and the item delivered by 31st March 2023.

The kinds of assets which may qualify for either the super-deduction or the 50% FYA include, but are not limited to:

  • Computer equipment and servers
  • Tractors, lorries, vans
  • Ladders, drills, cranes
  • Office chairs and desks
  • Electric vehicle charge points
  • Refrigeration units
  • Compressors
  • Foundry equipment
  • Solar panels

Also, from 1st April 2023, there is no longer a one-size-fits-all approach to corporation tax. The rate at which companies pay corporation tax will depend on the level of their profits. For the financial year 2023 (starting on 1st April 2023), the main rate of corporation tax will increase to 25% for companies whose profits exceed the ‘upper profits limit’, set at £250,000.

Companies whose profits do not exceed the ‘lower profits limit’, set at £50,000, will pay corporation tax at the ‘small profits rate’. This will remain at the current corporation tax rate of 19%. For companies whose profits fall between the lower and upper profits limits will pay secure marginal relief with a gradual increase in the rate of corporation tax as profits increase. Following this, the main rate of 25% is payable once profits reach the upper profits limit.

You can read our full Spring Budget 2023 update here.

As always, advice should be tailored. So, the information in this blog shouldn’t replace advice tailored to your unique circumstances.

Contact us to discuss your business and the impact of the end of super-deductions, corporation tax changes and budget updates.

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Sian Smith

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