I'm Scared About Corporation Tax - Should I Be?
The world of tax can be big and scary. If you’re not sure what you’re paying tax on, or how you need to pay it, how can you be sure you’re doing it right?
So without further ado, let’s look at what Corporation Tax is, the current rate of Corporation Tax, how you register to pay it, when it has to be paid, and how you can pay it.
What is Corporation Tax?
Corporation Tax is a tax paid by limited companies (and some other organisations) registered in the UK. The other organisations that pay Corporation Tax aren’t necessarily limited companies and include:
- Housing associations
- Membership organisations
- Clubs and societies
- Co-operatives
The Corporation Tax you pay is based on the following for your business:
- Trading profits
- Investments
- Sale of assets
Now we’ve covered who pays Corporation Tax; let’s look at the rate.
What is the current rate of Corporation Tax?
Currently (as of the 2022/23 tax year), your company will have to pay 19% Corporation Tax on all of its profits. This rate can periodically change, so make sure you regularly check in on it to make sure you are paying the correct rate.
How do I register to pay Corporation Tax?
When starting your company, you will need to register for Corporation Tax on the gov.uk website. As part of the process, HMRC will ask for the following information from you:
- Company name
- Registration number
- Your business start date (the start date of your accounting period)
- Your main business address
- Type of business
- Name and home address of any directors in the company
You will need to complete the registration within three months of the commencement of trade.
Note: trading refers to any business activity from buying stock to placing an advert, it doesn’t have to mean you are making money.
When does Corporation Tax need to be paid?
Corporation Tax is different from other taxes; you must pay it before filing your company tax return. So you need to know your Corporation Tax accounting period.
Once you have submitted your return, you have to settle the bill within nine months and one day after the end of your accounting period from the previous financial year.
How can I pay my Corporation Tax?
There are several options you can choose from to pay your Corporation Tax. However, you will have to make sure the payment will clear before your deadline. So you will need to choose your payment method carefully.
Same day/next day payments
If you need the payment made quickly, you will have to use:
- CHAPS
- Online banking
- Telephone banking
Payment in three working days
If you have some more time to play with, you can use the following:
- Bacs
- Direct debit (if you’ve already set it up)
- Online payment by debit or corporate credit card
- At your bank or building society
Payment in five working days
If you’re in no rush for the payment to go through, you can use the following:
- Direct debit (if you haven’t previously set one up)
Be aware that payment with a personal credit card can take longer again, so you will need to have the funds available and enough time for them to clear.
Summing Up
As with everything in life, the more you know about it, the better prepared you can be to face it. Hopefully, now that we’ve covered what you need to know about Corporation Tax, you can be less scared of it when the time comes to complete your Corporation Tax return.
By knowing what Corporation Tax is, who has to pay it, what the current rate is, how you need to register and how you can pay it, we hope that you’re less scared than you were before reading this post.
- 28 Mar 2024 - Why Does Your Company Need A Contingency Plan?
- 25 Feb 2024 - March 4th updates - Registered email and lawful purpose statement
- 01 Feb 2024 - Setting Up A Limited Company? Here’s What You Need To Know
- 15 Jan 2024 - How Do You Know If Your Business Is Doing Well?
- 13 Dec 2023 - Making Your Company Dormant