Limited companies in the UK have a legal obligation to pay corporation tax to HMRC based on any profits they make over the year.
The process can be complex, especially for newer company owners who have not had much experience in dealing with tax payments.
Here is our step-by-step guide to corporation tax and how to settle your bill.
What are the current corporation tax rates?
As of April 2023, there have been changes to the corporation tax rates for companies of all sizes.
The Government introduced a new small profits rate at the start of the 2023/24 tax year. This rate is 19% for any company with an annual profit of £50,000 or less. Companies with profits of £250,000 and over will pay the main rate of corporation tax, which now stands at 25%. Any company profits between these thresholds are charged at the 25% rate but reduced by marginal relief.
Registering your company
Your first step will be to register your company for corporation tax. Usually, you will do this at the same time as registering with Companies House.
To sign up for corporation tax, you must sign into your business tax account on the Government website. When registering, you will need to provide HMRC with:
- your company’s registration number
- the date you started to do business
- the date your annual accounts are made up to.
Once you have done this, you will receive a unique taxpayer reference (UTR), delivered to your company’s registered address. HMRC will then tell you your corporation tax deadline.
Company tax returns
In order to organise your bill and pay HMRC, you will first have to complete and file a company tax return. Even if you do not make a profit during your accounting period, you will still need to report this to HMRC.
When you file your return, you will calculate your company’s profits, deducting allowable expenses your company has accrued over the year to reach your taxable profit for corporation tax.
Full guidance on calculating your corporation tax bill can be found on the Government website. Alternatively, you can hire an accountant to do this for you and ensure total peace of mind.
Deadlines
The deadline for your tax return is 12 months after the end of your accounting period.
There is also a separate deadline for paying your corporation tax bill, which is usually nine months and one day after the end of your accounting period.
Paying your bill
How you pay your corporation tax bill will depend on your company’s annual profits.
For taxable profits of up to £1.5 million, you will have the aforementioned nine months and one day to settle your bill. You can do so in a singular online payment.
For taxable profits of £1.5m and over, you will have to pay HMRC in instalments. Again, this can be done via electronic payment. Very large companies, with profits over £20m, have a different set of rules for their payments. You can find them here.
You must make your payments on time: otherwise, HMRC can and will charge you interest.
We can do it for you
Running a limited company requires a great deal of dedication and focus. Rather than spend your valuable time calculating and paying your corporation tax bill, speak to us – we can carry out the calculations and file the return on your behalf, as well as provide valuable tax planning advice.
Let us deal with HMRC for you so you can focus on running your company. Get in touch today for help with your corporation tax payments.