Getting to grips with your corporation tax can be a challenge, especially with the changes that can come through year on year. Our plain English guide to corporation tax aims to help you get to grips with the basics to help you better understand your corporation tax.
What is Corporation Tax?
First things first, what exactly is corporation tax? Corporation tax, or CT, is a direct tax to businesses based on the company’s taxable profits. This includes income from your business activities, investments and any capital gains.
Corporation Tax Rates from April 6th, 2023
- For companies with annual profits under £50,000, you’ll pay CT at the lower rate of 19%.
- For companies with annual profits over £250,000, you’ll pay CT at the higher rate of 25%.
- For companies with annual profits between £50,000 and £250,000, the corporation tax is on a sliding scale. The CT rate will vary between 19% and 25% depending on the company’s taxable profits.
Key Responsibilities
As a company, there are key responsibilities that you need to make sure are dealt with, and as a director, that responsibility falls on you.
- Register with HM Revenue and Customs (HMRC) – your company must register with HMRC for CT within three months of starting trading as a business.
- Keep accurate records – keeping accurate and up-to-date financial records is essential and is required by HMRC.
- Calculate your taxable profits – at the end of each year, the company must calculate the taxable profits by deducting any allowable expenses from your total income. Under normal circumstances, it is recommended that you speak to an accountant to assist with this.
- Prepare and submit a CT return – every year the company must prepare and submit a corporation tax return form (CT600). The return gives details of the company’s taxable profits, the tax calculation, and any liabilities owed to HMRC. In the same way that your taxable profits are calculated, the CT600 would usually be completed by your tax advisor.
- Paying the corporation tax – most companies must pay corporation tax, the amount due is calculated on the company’s CT600. The amount owed is due to HMRC within 9 months and 1 day of the end of the company’s account period.
- File accounts with Companies House – your company must file its statutory accounts with Companies House within 9 months of the end of the company’s accounting period. Once again, this is usually dealt with by your accountant.
If you have any questions or would like further advice, please get in touch with us so that we can assist wherever we can.