The process of establishing a limited company requires patience and ambition. There are a few tax advantages and reliefs that accompany these taxes. The companies registered in the UK are subject to paying corporation taxes on their overall profits.
So, as a limited company in the UK, you are supposed to pay corporation tax on time as per government rules. Let’s learn about these taxes in depth.
What are corporation taxes?
The standard tax for any limited company, organisation, or business is known as corporation tax in the UK. The yearly tax returns play a role in deciding these profit-based taxes.
Sole traders and partnership-based businesses do not pay such taxes but are liable to pay income taxes. However, corporation taxes are applicable to start-ups and are based on cash flows, investments, sales, etc.
How much is corporation tax in the UK?
As of 2020, corporation tax up to 19% of your total gains. These taxes change frequently, and one can refer to the official websites of the government to know the time of accounting periods of financial statements.
Important things to note:
- Corporation taxes will come into effect on April 1 2023.
- Any limited company making over £250,000 will pay between 19-25% of corporation tax. Companies with profits up to £50,000 will continue to pay 19%.
- In comparison, a marginal relief can also be observed in cases having profits up to £250,000. These accounting periods cannot be longer than 12 months for small businesses.
- In the case of companies that gain profits up to £1.5 million, taxes are paid in four instalments. These instalments are due on the seventh and tenth month of the current accounting period. Then, the first and fourth months after the accounting period.
- The companies having over £20 million of profit, the corporate income tax payments are to be paid in four instalments. These instalment periods include the financial year’s third, sixth, ninth, and twelfth months.
How to pay corporation tax?
In order to pay these taxes, you need to register with Companies House either by post, through an agent, or third-party software. This is supposed to be done within three months of starting the trade.
Form CT600 is to be filled out every year. If you fill out a paper form, you must additionally complete and mail form WT1. This is to justify the reason behind using the paper form.
The annual turnover and profit for the reporting period, tax computations, and the allowances and reliefs you’ve used are some of the information you’ll need to include in this form. Even if your company faces losses, you must still fill out the form to make this declaration.
Paying corporate tax online
You can choose to pay corporate tax online or through a telephone bank transfer. This can be done via Faster Payments, CHAPS, or Bacs. You will be instructed on which account to transfer the money by your “notice to deliver your tax return” or any subsequent reminder from HMRC. HMRC Cumbernauld should be used if you’re unsure about this decision.
To pay for an accounting period, use your 17-character Corporation Tax payment reference number. If you don’t know your reference number, you can either search for it on “notice to deliver your tax return” or HMRC reminders. Another method to search your tax reference number is to choose “see Corporation Tax statement” and “accounting periods” on your company’s HMRC online account, then choose the appropriate period.
A different payment reference number is used every time you pay taxes. This is because it changes with each accounting month.
Even on weekends and bank holidays, Faster Payments (online or telephone banking) payments typically arrive at HMRC the same day or the next.
If you pay through CHAPS during your bank’s processing hours, your payment will often reach HMRC on the same working day. In other scenarios, Bacs payments take three business days.
Important links to pay corporation tax
If a private limited company is either a resident or has an office in the UK, it is bound to pay Corporation taxes. Based on annual profits, these companies follow different time periods to file these taxes and returns. HM Revenue and Customs cannot be paid through the post and thus are limited to online transactions only.
One should also ensure that these taxes are filed properly to enjoy tax returns to the fullest. If you need assistance regarding this matter, you can contact Mishoura and connect with the best legal support.