Tax: What SMEs need to know

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The current landscape for SMEs is a challenging one; both energy bills and inflation more broadly still sit at uncomfortable levels and supply chains are disjointed in many sectors. While there is certainly a lot to think about, keeping on top of ever-changing tax rules can be a challenge.

As an SME owner, it’s important to ensure you're compliant, but also that you're not paying too much, or too little for what is applicable to your business. With plenty of changes introduced earlier this year, we are looking at crucial things that SMEs need to keep in mind when thinking about tax.

Corporation tax

The biggest changes that businesses need to be aware of this year are those to corporation tax rates. As of April 2023, the main rate of corporation tax rose from 19% to 25% for businesses whose profits exceed £250,000 annually. This is applicable to all company profits, not just those that exceed the £250,000 threshold. For businesses whose annual profits are below £50,000 a ‘small profits rate’ of 19% now applies. For SMEs whose profits lie between these two bands, a taper system has been implemented which will see companies paying a marginal rate of 26.5% on profits that lie between £50,000 and £250,000.

With a multitude of nuances associated with the corporation tax changes, it's important to understand whether your business will be affected. It is always advisable to consult both an accountant and a tax adviser when dealing with these complex matters. There is also an array of useful tools available online which can help you crunch the numbers, for example the Bytestart Corporation Tax Increase Calculator.

The introduction of ‘full expensing’

Many UK SMEs will be aware that the super-deduction tax relief scheme, which allowed companies to claim 130% of their capital expenses as tax deductible, came to an end in March of this year.

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