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I’ve heard about a 5% corporate tax rate – how can I benefit?

Does a 5% corporate tax rate sound like something you’d want to know about for your business? Our guess is, yes.

In a short amount of time, you could save your business thousands per year by benefitting from a reduced corporate tax rate.

Let our experts talk you through the process in more detail.


Why you should choose to save with a 5% corporate tax rate #

As of 6 April 2023, the UK Government have introduced a sliding scale for corporate tax rates. The first £50,000 profits earned will be taxed at a value of 19% while the total taxed charged on anything over £250,000 profits will be 26.5%.

The negative outcome of this is that small business owners can’t compete on an equal footing with larger firms.

By opting for a more favourable tax rate of 5%, businesses and entrepreneurs can continue to develop profits without having to pay a substantial amount in corporation tax.


How is paying 5% corporation tax possible? #

Simply put, businesses who generate a specific number of profits can benefit from a reduced tax rate of 5%. For example, Portuguese tax authorities ask for a minimum of £250,000 profit before they will allow businesses to benefit from a 5% corporate tax rate.

The UK has long-standing double taxation treaties with many different countries of the world. Double tax treaties are designed to protect businesses and individuals from being taxed in their country of residence as well as their country of operations. Under the treaties, both countries will agree to tax certain income on either a territorial or international basis.

On a territorial basis, income arising in one country is taxed in that country; whereas income arising in two countries may be taxed in either country depending on the agreement. The treaty also provides exemptions from taxation for certain types of income; such as pension payments and government grants.

Eliminating the risk of double taxation by allowing the country of residence to grant a credit for taxes paid in the other country, businesses and individuals can benefit from reduced tax liabilities and more certainty when it comes to international business transactions.

**To put everything into context, we’ve put together a quick analysis between a company in the UK and a company in Portugal – both with an income of £250,000:

I've heard about a 5% corporate tax rate - how can I benefit?

See your tax savings! #



What about changes in the future? #

If there are changes in the future, you can still be protected. For example, if your business is sold, the 5% corporate tax rate should remain applicable as long as the governing body of the country of operation makes no changes. In other instances, if shares are held for less than a year, there may be taxes on dividends. In another instance, if tax rates change, there would be time to make suitable changes to ensure your business still remains profitable.


We can support you #

RHJ Accountants have enabled many businesses and individuals to reduce their tax burdens over the past decade. To reduce your tax rates, to create a strategic business plan or to gain valuable insight, speak with our team of international experts.

For businesses and individuals who don’t earn over £250,000 per year and therefore can’t benefit from the 5% corporate tax rate, there are still options. There are many other ways in which you can become more tax efficient, reduce your burdens and increase profits – talk to our experts to find out more.

I've heard about a 5% corporate tax rate - how can I benefit?

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