If you form a limited company in the UK, you’re required to pay corporation tax to the government. Here Turner Little discusses the following question; how much is corporation tax for small businesses?
What is corporation tax paid on?
The amount of corporation tax your business pays depends on how much profit you earn. What is corporation tax paid on? Basically ‘taxable profits;’ the money you make from doing business (trading profits), investments and assets you sell for more than you bought them for (chargeable gains).
If your company is UK-based, you’re required to pay corporation tax on all the profit you make in the UK and abroad. However if you’re not UK-based but you have an office in the country, you’re only required to pay corporation tax on profits you earn in the UK. If you travel a lot for business, it may keep your firm’s expenditure down to establish your company offshore, which Turner Little can help you with.
Corporation tax rates
Now we know what corporation tax is paid on, we need to look at how much a small business would be required to pay; for this we need to explain corporation tax rates. The amount of corporation tax you pay depends on your firm’s accounting period; the time covered by your Company Tax Return.
There used to be different corporation tax rates based on how much profit your business earned in its latest accounting period. As things stand, all companies are required to pay 20% corporation tax on taxable profit earned from 1st April 2015. You may be able to apply for allowances and reliefs that could lower your firm’s corporation tax bill. For instance, if you buy assets that you keep to run your venture e.g. machinery, you can claim capital allowances on your company’s corporation tax.
Working out your bill
But how do you work out your firm’s corporation tax bill? When you start your business you must register for corporation tax within three months of establishing the company; you can do this online. Then, you’re required to keep accounting records for your business and prepare a Company Tax Return; filing tax documents is one of the legal obligations of a company director.
Before you file your Company Tax Return, use it to determine how much corporation tax your business needs to pay for the accounting period in question. You must either pay your corporation tax bill to HM Revenue and Customs (HMRC), or report that your business owes no corporation tax, by a specific deadline. This is usually nine months and one day following your firm’s previous accounting period. Make sure you meet this deadline, or HMRC might charge you interest on your payments.
Pay corporation tax online
Next, we need to look at how to make your corporation tax payment. For the sake of efficiency, you may wish to pay corporation tax online. You can pay corporation tax through online or telephone banking and it’ll be processed by HMRC within a day or two. If you’ve already set up an account with HMRC online services, you can pay your bill within three working days of receipt via direct debit (this will take five working days if you need to set up an account) or credit card online.
But you don’t have to pay your business’ corporation tax bill online. As long as you have HMRC’s bank details and your corporation tax reference number, you can pay your bill through BACS, or at your post office/bank/building society and it’ll take three working days to reach HMRC’s account.
If your firm’s corporation tax deadline falls on a bank holiday or weekend, ensure the payment reaches HMRC’s account on the last working day before the deadline, unless you’re paying through online or telephone banking. If you’re cutting it fine and you need to submit your firm’s corporation tax payment to HMRC within one day and you can’t do so online, you’ll have to pay via CHAPS, but this method is pretty expensive so you may want to avoid it.
Turner Little
It’s vital that your company has the infrastructure required to work out how much your small business needs to pay the government in corporation tax. With Turner Little’s miscellaneous services, you can receive the support you need to meet your venture’s corporation tax obligations.
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider.
