Impact of reduced company tax rates
Oh wow! Company Tax down from 28% to 27%. Isn’t that lovely? But what does it mean exactly?
If your company is doing OK, then it probably makes about 7% net profit on turnover before tax. Then, until this exciting announcement, it paid 28% x 7% tax, that’s 1,96% of turnover. Now however, you must be really happy, because it will only pay 1,89%, a massive saving of .07% of turnover. So the next time you think of increasing your selling prices, be sure to pass at least some of the benefit on to your customers. They will love you for it!
But don’t be too hasty. The new tax rate only starts for year ended 28 February 2023 (assuming a Feb year end), and you won’t feel any cash flow benefit until you submit your 1st Provisional Tax Return 2023 which is due by 31 August 2022. So you’ve got another 17 months to get excited.