Running a business is rewarding, but facing tax season can be stressful. One crucial tax you’ll encounter is Corporation Tax. This guide simplifies how to pay Corporation Tax for your UK small business, ensuring compliance and financial well-being.
This guide will simplify the process, helping you meet your obligations with confidence. From registration to submission, we cover the crucial steps that ensure you’re on top of your tax affairs.
By mastering how to pay corporation tax for your small business, you can focus more on what you do best—growing your business. Let’s ensure that managing your taxes becomes a straightforward part of your business strategy.
What is corporation tax, and how much do you have to pay?
Corporation Tax is a tax levied on the profits of UK limited companies and other organisations like clubs and associations. The amount a limited company pays depends on its profit level. For small profits of £50,000 or less, the rate is 19%. Companies with profits exceeding £250,000 pay the main rate of 25%. A marginal relief system applies to profits between £50,000 and £250,000, providing a gradual increase in the effective tax rate. It’s important to note that these rates are for the financial year starting 1 April 2023 and may be subject to change in the future. Additional rules and rates may also apply to specific business types or income sources.
Looking for a corporation tax guide? Fret not, we have created the perfect guide for you.
How to pay your corporation tax bill
To handle your corporation tax bill, you’ll need to submit a Company Tax Return to HMRC. This return should detail your company’s income and subtract any allowable expenses or tax deductions.
Once filed, HMRC will tell you how much corporation tax you owe. It’s important to pay by the deadline to avoid penalties and interest charges.
Pro tip: Marking the corporation tax payment deadline on your calendar is a game-changer. It’s one less thing to stress about when the deadline comes.
When it comes time to actually pay, you have a few options:
- Online or telephone banking (Faster Payments, CHAPS or Bacs)
- By debit or corporate credit card online
- At your bank or building society
- By Direct Debit (if you’ve set one up with HMRC)
Just make sure to include your 17-character payment reference so HMRC can allocate the payment to your account.
When is the corporation tax deadline?
Your corporation tax payment deadline is typically 9 months and 1 day after the end of your accounting period.
For example, if your accounting period ends on March 31st, your payment deadline would be January 1st of the following year.
It’s advisable to pay early to ensure you meet the deadline and avoid any late penalties. During these accounting periods, it’s always better to pay a few days in advance, just to be safe.
If your deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before it. Remember to always meet tax deadlines to avoid hefty penalties.
3 ways you could lower your corporation tax bill
Running a business means constantly trying to find legal methods to reduce corporation tax bill. Here’s a list of three tactics that really help if you’re one of the people who pays corporation tax:
1) Consider making an employer pension contribution
Making contributions to an approved employer pension scheme can reduce your company’s taxable profits, thus lowering your corporation’s tax bill.
Pension contributions are considered an allowable expense for tax relief purposes. It’s actually a win-win scenario – you save on taxes and invest in your future.
2) Claim for every business expense possible
Make sure to claim all your allowable expenses. Things like office supplies, travel costs, and employee wages can be deducted from your earnings, helping lower the amount of tax you owe.
Make sure to keep thorough accounting records and save all your receipts. It might take a bit more effort, but it’s definitely worth it when tax season rolls around.
3) Make a charity donation
Donating to registered charities can provide tax relief for your company. Donations made through Gift Aid or as sponsorship payments are deductible from your total business profits.
You can lower your corporation tax liability while backing community groups close to your heart. It’s a rewarding way to save on taxes and make a difference at the same time.
Registering to pay corporation tax
After you set up a new limited company, HMRC will mail you a letter with your company’s Unique Taxpayer Reference (UTR). This letter also includes steps to create your online corporation tax account.
You must register within 3 months of starting to do business. Don’t put this off; it’s a legal requirement.
After registering, it’s important to keep detailed accounting records and submit your annual accounts to Companies House. These records help determine how much corporation tax you owe.
Key Takeaway:
Stay on top of your taxable profits throughout the year to budget for corporation tax. File a Company Tax Return with HMRC and pay by the deadline using various methods like online banking or Direct Debit. Consider pension contributions, business expenses, and charity donations to lower your bill legally.
Conclusion
You’ve made it through the ins and outs of how to pay corporation tax. It’s not always easy, but you’ve got this. Remember, staying organised and on top of your tax obligations is key to keeping your limited company running smoothly. From understanding what corporation tax return is and how much you need to pay, to knowing when the tax deadlines are and exploring ways to potentially lower your bill and government services, you’re now equipped with the knowledge to tackle this important task with confidence.
Take a moment to gather your thoughts during these accounting working days, put what you’ve learned into practice, and tackle how to pay corporation tax head-on.
If you need assistance, we’re here to help.
FAQs in relation to how to pay corporation tax
How do I pay my Corporation Tax to HMRC?
Paying corporation tax can be done via bank transfer, direct debit, credit card, or telephone banking. Use the correct bank details and reference number.
How is Corporation Tax paid in UK?
Corporation tax in the UK is paid directly to HM Revenue and Customs (HMRC) using online payment methods or transfers to bank account.
How do I check if my Corporation Tax has been paid?
You can verify payment by logging into your HMRC online account. Check under “corporation tax” for transaction history.
Can I pay Corporation Tax by bank transfer?
Yes, you can use a BACS bank transfer to pay your corporation tax. Ensure you use the right sort code and account number from HMRC’s details.
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