21 May 2024

What the upcoming tax changes mean for you

Advanced Engineering

The latest tax changes have brought significant implications for manufacturing and supply chain professionals, further destabilising the financial landscape in which they operate. Back in March 2021, then-Chancellor Rishi Sunak first announced the April 2023 corporation tax rise, and despite it being scrapped by Kwasi Kwarteng in September 2022, it was later confirmed that the original plan would go ahead. This has put additional strain on manufacturers which Jeremy Whittingham, consultant for science, technology and engineering companies and part of the organising team at Advanced Engineering, discusses.

The changes   

You may well be aware that there have been significant changes to the corporation tax rates —the tax that UK companies must pay on their profits. April 2023 saw the announcement of the main rate of corporation tax increasing from 19 per cent to 25 per cent for companies with profits over £250,000, whereas smaller companies will not have to pay the full rate as it depends on their level of profits for each fiscal tax year.

What’s more, the 19% rate remains and is used as a small profits rate for companies with annual profits at or below a new £50,000 threshold, while the full 25% rate applies to companies with annual profits of £250,000 or more.

Between these two rates, a system of marginal relief can apply, which will be music to the ears of those small and medium-sized enterprises (SMEs) dealing with already stretched costs.

Marginal relief for SMEs

Business reliefs refer to various measures implemented by governments to support SMEs during challenging times. These initiatives aim to alleviate financial burdens, foster growth and encourage resilience in the form of tax breaks, grants, subsidies and low-interest loans.

A marginal relief provides a gradual increase in the corporation tax rate between the small profits rate and the main rate. This prevents SMEs from facing an abrupt increase in tax liability by gradually phasing in the higher rates, helping to protect them from disproportionate tax burdens and ensuring that their growth and profitability are not stifled.

Governments often offer targeted programmes to assist SMEs in specific industries, such as manufacturing and engineering, to encourage entrepreneurship and business expansion for job creation, innovation or, crucially, investment.

Room for investment

Manufacturers are concerned about the state of the UK’s manufacturing sector, with it standing at a critical juncture after both America and Europe implemented policies which threaten to leave the UK behind.

In fact, Make UK, which represents 20,000 manufacturers across the country, recently reported that 80 per cent of companies in a survey of 312 manufacturers believed the lack of a plan put their firm at a competitive disadvantage to businesses in other countries.

In addition, almost 60% said they thought the government had never had a robust vision for manufacturing, while as many as a quarter said it was the main reason the sector had not grown more quickly over the past decade.

Manufacturers are having to operate in ever-more volatile environments, meaning the need to invest more is even more pressing. A way in which investment can be made in new technologies is by attending notorious trade shows, such as Advanced Engineering, which allows manufacturing professionals to exhibit the capabilities and features of new technologies in a live setting, providing potential investors with a firsthand experience.

Taking place on 1 and 2 November 2023 at the NEC, Birmingham, Advanced Engineering is the UK’s largest annual gathering of leading engineering and supply chain professionals, gathering the latest industry developments in one place to guide investment and stabilise the financial landscape across the UK manufacturing sector.

To register at the event, please click here, or if you would like find out more, then visit https://www.advancedengineeringuk.com/