As the new tax year approaches, businesses need to stay informed about significant changes that may affect their financial planning and tax strategies. The 2024 tax year brings several important updates that company taxpayers in the UK should be aware of. Here are the most significant changes:
1. Increase in Corporation Tax Rate
One of the most impactful changes is the increase in the corporation tax rate:
- Main Rate Increase: The corporation tax rate will rise from 19% to 25% for companies with profits over £250,000. This change aims to increase government revenue but will significantly impact businesses’ after-tax profits.
- Small Profits Rate: Companies with profits up to £50,000 will continue to pay the 19% rate. For profits between £50,000 and £250,000, a marginal relief will be applied, resulting in a gradual increase in the effective tax rate.
2. Changes to Capital Allowances
Changes to capital allowances can influence how businesses plan their investments in plant and machinery:
- End of Super Deduction: The 130% super deduction for capital investments, which allowed businesses to claim enhanced relief, ended on March 31, 2023. Companies must now revert to standard capital allowances for investments made after this date.
- Annual Investment Allowance (AIA): The AIA limit remains at £1 million, allowing businesses to deduct the full cost of qualifying plant and machinery investments up to this amount from their taxable profits.
3. Modifications to R&D Tax Reliefs
Research and Development (R&D) tax reliefs are undergoing changes to better target innovation incentives:
- SME R&D Relief: The relief rate for small and medium-sized enterprises (SMEs) is being adjusted. SMEs will now receive a lower deduction rate, but the credit system remains generous for genuine innovation activities.
- R&D Expenditure Credit (RDEC): The RDEC rate, used by larger companies and some SMEs, will see an increase, making it more attractive. This change aims to balance the support between small and large enterprises.
4. Introduction of the Digital Services Tax (DST)
The Digital Services Tax is a new measure targeting large digital businesses:
- Tax Rate: A 2% tax will be applied to the revenues of search engines, social media platforms, and online marketplaces that derive value from UK users.
- Thresholds: The DST applies only to businesses with global revenues exceeding £500 million and UK revenues over £25 million. This tax aims to ensure that digital businesses pay a fair share of tax in the UK.
5. Extended Reporting and Compliance Requirements
Businesses must adapt to enhanced reporting and compliance requirements:
- Making Tax Digital (MTD): The MTD initiative continues to expand, requiring more businesses to keep digital records and submit VAT returns using compatible software. From April 2024, MTD will apply to all VAT-registered businesses, regardless of turnover.
- Economic Crime Levy: Larger companies will be subject to a new levy aimed at funding measures to combat economic crime. This levy applies to entities regulated for anti-money laundering purposes.
How ET Accounting Can Help
ET Accounting specializes in helping businesses navigate tax changes and optimize their tax strategies. Here’s how we can support you through these significant changes in 2024:
- Strategic Tax Planning: We provide comprehensive tax planning services to help your business manage the impact of the increased corporation tax rate and take full advantage of available reliefs and allowances.
- Capital Allowance Optimization: Our experts ensure that your business maximizes the benefits from capital allowances, including AIA and standard reliefs, following the end of the super deduction.
- R&D Tax Relief Guidance: We assist in identifying eligible R&D activities and claiming the maximum relief under the revised SME and RDEC schemes.
- Compliance and Reporting: ET Accounting helps you stay compliant with MTD and other reporting requirements, minimizing the risk of penalties and ensuring efficient tax administration.
- Digital Services Tax Advisory: For affected businesses, we provide guidance on calculating and managing DST liabilities, ensuring compliance while optimizing tax efficiency.
By partnering with ET Accounting, your business can confidently address the 2024 tax changes, ensuring compliance and optimizing tax efficiency. For more information, visit ET Accounting.
