Currently, there is a single rate of corporation tax of 19%. However, from April 2023, the main rate of corporation tax will increase to 25%. Companies with profits not exceeding £50,000 will continue to use the small profits rate of 19%.

This change will have a significant impact on the decision to incorporate going forward and it is unlikely to be worth doing so from a purely tax-motivated angle. Some of you may even consider leaving the company behind and looking at alternative structures.

Something to think about.

However, if a company is your preference, then consider the following tax strategies:

• if profits are not being withdrawn then they could be put to use for the company to make investments in its own name.
• you can make employer pension contributions which would deductible for corporation tax. The company loads your personal pension and amongst other things, saves National Insurance.
• consider utilising a SIPP or SSAS where you can borrow out of the fund for the business, or you could invest in commercial property, such as your own trading premises.
• bring a spouse or civil partner in as a second director/ shareholder. This may have the added benefit that the employment allowance would then be available. It would also have a drastic effect on the corporation tax and income tax charged. Splitting a directors salary and dividend may well illuminate higher rate taxes altogether.