Corporation Tax

Corporation tax, also known as company tax, is a tax paid by businesses based on their yearly profits. If you run a limited company, the rate of tax that you pay is 25% if your business makes £50,000 or more. If you make less, the rate is 19%. Unlike for sole traders, you don’t get a tax-free Personal Allowance to reduce corporation tax.

Who needs to pay company tax?

It’s not only limited companies who pay this tax. Actually, you have to pay if you’re any of the following organisations and you make profit:

  • Any foreign company with a UK branch or office
  • A club
  • A co-operative
  • A community group
  • A sports club
  • Housing associations

How do I pay corporation tax?

Before you pay company tax, you need to register your company via Companies House and register to pay with HMRC. This is a single process unless you registered your company by post, with third-party software or using an agent. If you did any of these three things, you should register to pay corporation tax separately from when you register with Companies House.

Make sure that you pay your bill nine months and one day after the end of your accounting period.

What if I pay late?

If you pay your company tax bill late, HMRC has various powers to claim any money owed in the following ways:

  • Collect money from your wages or pension
  • Take you to court
  • Make you file for bankruptcy
  • Take money from your bank/building society account
  • Seize your assets to sell
  • Call the debt collectors on you

Essentially, if you don’t pay on time, HMRC’s powers are far-reaching. It’s best to get in contact with them as soon as you know you won’t be able to pay. They may let you set up a payment plan. Give them a call on 0300 200 3822.

What do I need to register for corporation tax?

To register to pay with HMRC, make sure you have these three things to hand:

  1. Your company’s registration number
  2. The date you started trading
  3. The date your annual accounts are made up to

Frequently Asked Questions

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