Topic overview

Business tax rates and thresholds

Business tax rates and thresholds

We've scoured the web to get you the most up-to-date advice which includes the most useful tools on offer from the officials themselves. The list below gives a summary of the key tax rates and allowances for the current and previous tax years and forthcoming changes to tax rates and tax thresholds where they have been previously announced. Use the links for further details. 

Corporation tax rates

From 1 April 2023, the rate of corporation tax payable depends on the level of profits made by a company.

  • Profits up to £50,000 incur corporation tax at 19%.
  • Profits over £250,000 incur corporation tax at 25%.
  • Marginal relief applies to profits between £50,000 and £250,000.
  • Businesses with profits that can be attributed to patented inventions and certain other intellectual property can elect to pay a reduced rate of 10% tax on those profits.

Find corporation tax rates for earlier years by visiting the HMRC pages.

You can use the HMRC marginal relief calculator for company profits between the small profits rate threshold and the main corporation tax threshold.

Capital allowances

From 1 April 2023 until 31 March 2026, businesses investing in qualifying plant and machinery will qualify for a 100% first-year allowance for main rate assets meaning they can write off the full cost in the year of investment.

Companies investing in special rate (including long life) assets will benefit from a 50% first-year allowance in the year in which they make the investment.

The Structures and Building Allowance is 3% for both corporation and income tax purposes.

The annual investment allowance (AIA) has been fixed at £1 million.

For investments in plant and machinery over the AIA, writing down allowances spread the tax deductions over time. The rates are:

  • 18% - main writing down allowance;
  • 6% - special rate pool;
  • 3% - structures and building allowance from 1 April 2020 for corporation tax and from 6 April 2020 for income tax;

For motor cars:

  • 100% on electric cars and those with low emissions, less than 50g/km;
  • 18% for those with emissions between 50 and 110g/km;
  • 6% for those with emissions over 110g/km.

Special rules apply for some types of assets. Guidance can be found on the GOV.UK pages.

Chargeable gains and indexation allowances

For companies, gains or losses on disposals of assets are dealt with through corporation tax.

If you sell or dispose of a business asset, corporation tax is payable on any profit (chargeable gain). When working out your gain, you can use indexation allowance to reflect the increase in value from when the asset is acquired to when it is eventually disposed of.

Indexation allowance was frozen on 1 January 2018. Find information on indexation allowance on the GOV.UK website.

For sole traders and partnerships, disposals of assets are dealt with through capital gains tax, usually as part of their annual self assessment return.

Business rates and stamp duty

Find current and historic business rate multipliers by visiting the Valuation Office Agency website.

Stamp duty on non-residential property purchases and lease premiums has remained the same since 17 March 2016:

  • property value up to £150,000 at 0%;
  • property value between £150,001 and £250,000 at 2%;
  • property value over £250,000 at 5%.

There is an additional 2% surcharge for non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.

Find further details of stamp duty land tax (SDLT) rates and thresholds for both commercial and residential property and various reliefs by visiting the HMRC website.

VAT thresholds and tax rates

The VAT registration and deregistration thresholds and rates are: 

  • Annual VAT registration threshold: £90,000 (£85,000 between 1 April 2017 and 31 March 2024).
  • Annual VAT de-registration threshold: £88,000 (£83,000 between 1 April 2017 and 31 March 2024).
  • Standard rate of VAT is 20%.
  • Reduced-rate supplies are taxed at 5% and zero-rated goods at 0%.

Smaller businesses can simplify their VAT with special accounting schemes. The VAT taxable turnover limits are:

  • Annual accounting scheme: registration is allowed provided your estimated VAT taxable turnover for the next year is no more than £1.35 million; businesses using the scheme can do so until their estimated turnover exceeds £1.6 million.
  • Cash accounting scheme: registration limit £1.35 million; deregistration £1.6 million.
  • Flat rate accounting scheme: registration limit £150,000; deregistration £230,000.
  • Different retail schemes and margin schemes for traders in second-hand goods are also available, depending on your turnover. Take advice on what best suits your circumstances.

National Insurance contributions thresholds and rates 

Class 1 employee and employer weekly thresholds:

  • Lower earnings limit: £123;
  • Primary threshold: £241.73;
  • Secondary thresholds: £175;
  • Freeport upper secondary threshold: £481;
  • Upper earnings limit and threshold: £967.

Class 1 rates:

  • Employee and employer rate below Primary and Secondary thresholds is 0%;
  • Employee rate between Primary threshold and Upper limit is 10% (8% from April 2024);
  • Employee rate above the Upper limit is 2%
  • Employer rate on earnings above Secondary threshold is 13.8%.

The main self-employed rates are: 

  • Class 2 flat rate at £3.45 per week (these will be abolished entirely from April 2024);
  • Class 4 at 9% on profits between £12,570 and £50,270 (6% from April 2024);
  • Class 4 at 2% on profits above £50,270.

Find further details for National Insurance contributions (NICs) rates and thresholds for employees, employers and the self-employed by visiting the HMRC pages.

PAYE rates and thresholds

Taxable income for employees is calculated after taking into account their tax-free personal allowance.

  • Income tax basic rate is 20% on taxable income up to £37,700.
  • Higher rate income tax is 40% on taxable income between the basic rate band £125,140 (unchanged).
  • Additional rate tax is 45% on annual earnings above £125,141.

Visit the HMRC pages to find further details for PAYE rates and thresholds for employers.

Use the HMRC tax checker for employees for a quick assessment of whether you paid the correct tax for a previous year. This calculator is not suitable for the self-employed.

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