The Chancellor announced the following reduction in corporation tax rates effective from 1 April 2002 (i.e. retrospectively).
- The small companies' rate of corporation tax has been reduced from 20% to 19%, and applies where a company has profits of between £50,001 and £300,000.
- Where a company's profits do not exceed £10,000 there is a new starting zero rate - a dramatic reduction from the 10% rate applying previously. Any profit between £10,001 and £50,000 will be assessable at the marginal rate of 23.75%.
- The main rate of corporation tax will continue to be at 30% and will apply to profits of a company of more than £1,500,000.
- In between the £300,000 and £1,500,000 figures, marginal rate relief applies. This operates to increase the overall rate of tax to somewhere between the small companies' rate of 19% and the main rate of 30%. Profits in excess of £300,000 will effectively bear tax at the marginal rate of 32.75%.