Business News - Corporation Tax Business News

The current starting rate of corporation tax of 0% was introduced in 2002 and applies to companies with taxable profits of £10,000 or less. This rate increases for companies with profits between £10,000 and £50,000 to a rate of 19%. The 0% rate was introduced in an attempt to encourage more people to start their own businesses.

In 2004, the government thought the system was being ‘abused’ and introduced a ‘non-corporate distribution rate’ of 19% on companies to the extent that profits were distributed.

This has created a complex system and the government has decided that many self-employed and employed people are being advised to form limited companies simply to reduce their tax and national insurance liabilities.

The government has therefore decided to replace the non-corporate distribution and zero rates with a new single banding set at the current small companies' rate of 19%.

12/12/2005