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# Marginal Tax Rate

Marginal Tax Rate

• ### Maximum pension contribution

Hi to All,

The main rate of corporation tax would be 23% in 2013. Does anyone know how to calculate marginal rate?

Regards

### Replies

06th Dec 2012 12:56

23.75%

Yes

Thanks (1)
06th Dec 2012 12:58

This is a maths question!

Not an accounting question!  And I too know how to calculate it and agree with gbuckell.

Thanks (0)
06th Dec 2012 13:25

Yes I know too

.

Thanks (0)
By rohit
06th Dec 2012 14:38

Formula is...

Hi Zaidi

As to how it's calculated see below

MR = (5 * Higher Rate - Lower Rate) / 4

So for example the 2011-12 CT rates were 20/26%

(5 x .26 - 0.2) / 4 = 0.275

Same calc ran on 2012-13 yields 0.25 as MR

Same calc ran on 2013-14 yields 0.2375 as MR

I have the algebra workings if you need...

Thanks (2)
06th Dec 2012 14:31

I'm just wondering why we bother with a marginal rate. 0.75% ?  Just not worth the hassle.

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06th Dec 2012 14:32

Sssh! Rohit don't tell people!

They'll all know how to do it.

Obviously, Rohit's formula only holds while the lower limit is exactly 5 times the lower limit.

Using the abbreviations MR for main rate and SPR for small profits rate, Rohit's formula is derived as:

(1,500,000 x MR - 300,000 x SPR)/(1,500,000 - 300,000)... then divide through by 300,000 gives

(5 x MR - 1 x SPR)/(5 - 1)... which can be further simplified as per Rohit to

(5 x MR - SPR)/4

Thanks (0)
By rohit
to bettybobbymeggie
06th Dec 2012 15:31

Oops!

George Attazder wrote:

They'll all know how to do it.

Woops...didn't realise sorry!

Thanks (0)
By GaryMc
06th Dec 2012 14:33

Not for much longer

I think we will see another 1% cut by April 2014 to introduce a single 20% tax rate for companies - no need for marginal relief or counting associates or any of that stuff.

Or maybe they will keep it for election year?

Thanks (0)
By BKD
to Southwestbeancounter
06th Dec 2012 14:55

Associates

GaryMc wrote:

I think we will see another 1% cut by April 2014 to introduce a single 20% tax rate for companies - no need for marginal relief or counting associates or any of that stuff.

Unless there are other changes to legislation, associates will continue to be relevant - for QIPs, for instance

Thanks (0)
By GaryMc
to Glennzy
06th Dec 2012 21:44

Good point BKD

Unless they decide that having one tax rate is a good excuse to bring in QIPs for all companies?

If there is only one rate then there is no need for upper and lower profits limits for CT liability calculations so just wipe it all out and make all companies QIP payers - get the money in quicker.

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06th Dec 2012 14:43

Single tax rate?

Politicians talk about simplification but I don't think any of them understands what it means.

For example, the "simplification" they plan for small unincorporated business will simply be more complicated if they offer choices of whether they need to choose standard rates of expenses, cash movements or normal accounting.

Thanks (0)
06th Dec 2012 14:49

Simplification ?

What's the sense of having higher rates at lower incomes anyway ?

Corporation tax 20% then 23.75% then 23%

Income tax 20%, 40%, 60%, 40%, 50% ...... madness ....

Thanks (1)
By GW
to TomHerbert
06th Dec 2012 16:59

Lionofludesch, The marginal rate has always been higher right back to 1973 when they went from one rate for all to small and main rates, then it was 42%, 68.75%,  52%

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to bernard michael
07th Dec 2012 15:23

"Lionofludesch, The marginal rate has always been higher right back to 1973 when they went from one rate for all to small and main rates, then it was 42%, 68.75%, 52%"

Sadly, I'm old enough to remember it coming in.  But just because it's always been higher doesn't make it sensible.

And don't get me on about why we have a special dividend rate for Income Tax .... what was all that about ?  Just to make things more complicated ?

Thanks (0)
07th Dec 2012 15:29

Special dividend rate

Going a bit off topic!

My conclusion at the time was that this was a cunning ploy to limit the amount of tax that foreign parent companies could reclaim on dividends from UK subsidiaries via provisions in double tax treaties. Has anyone got any better ideas?

Thanks (0)
07th Dec 2012 18:28

You could well be right.

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By pjm02
10th Dec 2012 11:53

Marginal rate

Its probably simpler than this.

In essence the marginal rate is simply (£1.5m x full rate - £300k @ small rate)/1.2m

For example if full rate was 24% then marginal rate = (360k-60k)/1.2m = 25%

Thanks (0)
10th Dec 2012 13:22

Or even simpler than that....

Marginal rate = full rate plus the marginal relief fraction

So for FY12 it is 24% + 1/100th (1%) = 25%.

For FY13 it will be 23% + 3/400ths (0.75%) = 23.75%.

HTH

Malcolm

Thanks (1)
10th Dec 2012 19:28

i cant be bothered

i just rely on the software

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