Corporation Tax Rates

April 2006

A starting rate of corporation tax of 0% was introduced in 2002 and applies to companies with taxable profits of £10,000 or less. Companies with profits between £10,000 and £50,000 enjoy a marginal relief from the small companies rate of 19%. This was followed by the introduction of the non corporate distribution rate of 19% on profits which were distributed by way of dividends back to the shareholders.

The resulting has been a complex system and the government has concluded that many self employed people are still incorporating their businesses to reduce their tax and national insurance liabilities. The government has therefore decided to replace the non corporate distribution rules and 0% of corporation tax with the 19% small companies rate of tax. This will apply to companies with profits up to £300,000 with effect from 1 April 2006.

Internet link:

Budget notice on corporation tax rates

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