Corporation Tax in the UK is a tax that limited companies need to pay on their profits.
It’s a bit like Income Tax for companies, but the difference is that companies don’t have a personal allowance. This means that as soon as your business starts making a profit, it needs to start paying Corporation Tax (unless it’s previously made losses).
A company needs to pay it on the profits it makes from doing business (‘trading profits’), its investments, and selling assets for more than they cost (‘chargeable gains’ – company assets include land and property, equipment, machinery, and company shares).
How to register to pay Corporation Tax
One of the first things a small business must do when setting up is register for Corporation Tax, which you can do on the .Gov.uk website with HMRC. This needs to be done within three months of starting to trade.
What counts as trading includes buying, selling, advertising, renting a property, and employing someone. If you register late, you may get a penalty, so make sure registering for Corporation Tax is at the top of your checklist when starting out.
What are the rates?
The rate for company profits is 19%. As of the 2018-2019 tax year, this is now a standardised rate for all businesses. In 2016-17, the rate was 20 per cent. Prior to April 2016, the rate depended on how much profit your company made.
When is the return deadline?
This is where Corporation Tax gets slightly tricky, because the filing deadline differs from other taxes. You need to pay Corporation Tax before you file your company tax return and the date you need to pay it depends on your company’s accounting period (the accounting period will end on 31 March for most companies).
Like many aspects of running a business, Corporation Tax can get complicated. That’s when companies like us, NWD Accountancy, step in. Take a look at our services and see if we’re right for your company.