One key area of managing business finance is Corporation Tax. Whether you’re just setting up your limited company, or running an established business, Corporation Tax can’t be overlooked.
At Hanley & Co. Accountants, this month’s blog looks at understanding Corporation Tax. For more information, call us in Staveley, near Kendal on 01539 821869.
What is Corporation Tax?
Corporation Tax is the tax all limited companies must pay. It is a tax that’s payable against the profits your company makes. All profits are taxable. However, certain expenses can be deducted, and there are allowances to reduce your tax liability.
Corporation Tax applies to the following for limited companies:
- Trading profits
- Investments
- Selling assets
There are other organisations that may need to pay Corporation Tax despite not being limited companies. This includes:
- Housing Associations
- Membership Organisations
- Clubs & Societies
- Co-operatives/Clubs
Corporation Tax Rates
Currently, the rate for Corporation Tax is 25%. However, this can change. If your company made more than £250,000 in profits, then you must pay the standard 25% rate.
If your company made less than £50,000 in profits, you are entitled to pay the lower tax rate of 19%. Marginal relief applies for profits between £50,001 and £250,000.
How to Register & File
Register for Corporation Tax
After setting up your limited company with Companies House, you must register for Corporation Tax with HMRC within three months of starting to trade.
Keep Accurate Records
Maintain detailed financial records of income, expenses, assets and liabilities. HMRC requires businesses to keep these records for at least six years.
Prepare Annual Accounts & a Company Tax Return (CT600)
Each year, your company must prepare statutory annual accounts and file a Company Tax Return. This reports your company’s financial performance and calculates how much tax is due.
Pay Corporation Tax
You have 12 months to file your Corporation Tax return, but payment is usually due nine months and one day after the end of your company’s accounting period.
Tips to Staying on Top of Your Corporation Tax
Keep Good Records
Maintain organised records of all income, invoices, expenses and receipts throughout the year. Staying on top of your bookkeeping ensures you claim your allowable deductions, avoid errors and file your returns easily.
Set Money Aside for Tax
Regularly setting aside some profits to cover your Corporation Tax ensures you’re prepared to pay HMRC on time. This avoids penalties and financial strain.
Claim All Allowable Expenses
Check you are claiming all allowable expenses, such as salaries, office rent, and equipment. Maximising your deductions reduces your taxable profits, so you pay less Corporation Tax.
Hire an Accountant
Working with a professional accountant can help you save time, stress and money. At Hanley & Co. Accountants, we ensure you are compliant with HMRC, file accurate tax returns and identify opportunities to lower your tax bill.
Contact Hanley & Co. Accountants
If you require Corporation Tax advice, contact Hanley & Co. Accountants in Staveley, near Kendal. Serving across Cumbria, call us on 01539 821869. Alternatively, send us a message via our contact form and we will be in touch.
