Budget 2021: Largest incorporated businesses face a corporate tax hike | News

Businesses with profits over £50,000 – including law firms that have incorporated – will face higher corporation tax rates from 2023, it has been confirmed today.

Chancellor Rishi Sunak announced in his budget speech that the tax would rise from the current 19% to 25% for businesses with annual profits of at least £250,000. Increases will be reduced for businesses reporting profits between £50,000 and £250,000.

According to the SRA’s regulated population statistics, there are over 5,000 law firms that are incorporated companies – accounting for half of the total number – and pay corporation tax. It is not recorded how many would fall under the upper tax threshold.

Sunak said the increase to 25% will still leave the UK with the lowest corporate tax rate in the G7, and was needed to support the country’s recovery from the Covid pandemic.

According to Treasury projections, the corporation tax increase will bring in an additional £11.9bn in 2023/24, rising to £17.2bn in 2025/26.

Sunak also confirmed that he will maintain the personal income tax abatement and higher rate threshold from April 2022 to April 2026. Inheritance tax thresholds will also remain at their current levels until April 2026. April 2026.

Corporation tax only applies to corporations, so law firms operating as sole proprietorships, partnerships (including LLPs) will not be part of this increase from of 2023.

There remains the possibility of the UK’s tax regime continuing over the next few years as the government seeks to reduce debt levels accumulated during the pandemic.

Tim Snaith, a partner at national firm Winckworth Sherwood, said: ‘In many ways the budget didn’t have the dreaded sharp teeth. There was no mention of wealth tax, no sweeping reform of the inheritance tax regime, no sign of increasing tax on capital gains deemed unavoidable and extending SDLT leave .