Corporation Tax - FAQs
What is Corporation Tax?
Corporation Tax is a tax levied on Limited Company profits based on a set accounting period.
It does not apply to sole traders, partnerships or individuals.
How much Corporation Tax will I pay?
Corporation Tax is paid by Limited Companies, currently at 19%. The amount the company pays will depend on how much profit the company has made for the purposes of the corporation tax return (this may differ from the profit as per the limited company accounts).
When do Corporation Tax payments need to be made?
Corporation Tax is due within nine months of the end of the accounting period. For example, if the accounting period ends on 31st March, corporation tax payments would be due by 31st December.
How often does a limited company need to file Corporation Tax Returns?
Corporation Tax Returns can cover a maximum period of twelve months. Usually a company will submit two corporation tax returns in its first year of trading as the first set of accounts are often longer than twelve months to take the year end to the end of the relevant month (e.g. 15th March 2022 to 31st March 2023).
From year two onwards, companies typically submit one corporation tax return per year together with the annual limited company accounts.
How can the amount of Corporation Tax payable be reduced?
Corporation Tax payable is based on profits so it is important that the company claims all of the expenses it is entitled to, expenses reduce the profit and therefore corporation tax liability.
Companies can also claim capital allowances on qualifying assets and use this to reduce corporation tax liability. Recently, the government introduced capital allowances of up to 130% (more information) from 1st April 2021 for qualifying assets.
Finally, if the company makes a loss this can be carried forward to future accounting periods to offset corporation tax liabilities.
How do I make Corporation Tax payments?
You can make payments online through your company government gateway account. You will be assigned a reference number by HMRC for each return, you can find this reference on the "notice to deliver a company tax return" letter sent out by HMRC or from your accountant.
Are there any plans to increase or decrease the rate of Corporation Tax?
The government has announced that from 1st April 2023, the main rate of Corporation Tax for non-ring fenced profits will be increased to 25%, applying to profits over £250,000 per year.
A small profits rate (SPR) will be introduced for companies with profits of £50,000 or less per year, they will continue to pay Corporation Tax at 19%.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate over time.