Small companies rate increase to be deferred

The planned increase in the Small Company Rate from 21% to 22% from 1 April 2009 has been deferred until 1 April 2010.

Baker Tilly analysis

This is a modest change that will, never the less, be welcome by small businesses.

In detail

The small companies rate of tax has been progressively increased over the past three years (from 19% to 20% and now 21%). The effect has been to reduce the advantage of extracting profits by way of a dividend rather than as remuneration. This 'suspension' in the increases will provide a modest measure of relief for those businesses needing to retain profits.

The rate of tax on company profits where profits, for a stand alone company, do not exceed £300,000 will remain at 21% until the end of the Financial Year 2009 (31 March 2010).