What is Corporation Tax?
The simple answer is that Corporation Tax is the tax that a limited company must pay on both their profits and their gains from selling assets that have increased in value.
How much is Corporation tax?
As of April 1st 2023, corporation tax has increased to 25% from the former 19% rate. It should be noted that corporation tax rate is constantly changing year on year. Since 2000 the corporation tax rate has changed eight times, some changes being increases in the tax rate and some being more favourable decreases in the corporation tax rate.
What is the Small Profits rate and how does it work?
On the 1st April 2023 the government introduced a Small Profit rate. This is available when your taxable profits are below £50K. This means that for companies that have taxable profits of £50K and below they are then able to pay corporation tax at 19% instead of the new 25%.
What is the Main rate?
The main rate is the rate that applies to companies that have taxable profits of £250k and above. When a company is earning over £250K then their tax rate is increased to the main rate of 25% as of 1st April 2023.
What if my company has profits between £50K and £250K?
If your company has profits between the margin or £50K and £250K profits than your corporation tax is subject to Marginal rate relief. This means for any companies with profit between £50K and £250K they shall pay the higher rate of 25%, however this will be reduced by marginal rate relief which is calculated depending on your profits. The relief is on a sliding scale, the higher your profits are to £250K the smaller your marginal rate relief.
When must I pay my corporation tax?
Your corporation tax will always be due 9 months and 1 days after the end of your accounting period. For example, if your accounting period ends 31st December 2022, your corporation tax will be due by 1st October 2023. A useful tool to calculate your corporation tax will be due is a date calculator like this one, Date Calculator. You will need to submit a CT600 tax return, this is where you calculate and report your corporation tax for HMRC. You must submit your CT600 to HMRC 12 months after your accounting period has ended. To find out more please see preparing for your first filing period
What if my company is based in the UK but operates abroad?
If your company is based in the UK (its registered address is in the UK) then it must pay Corporation Tax on all of its profits made both in the UK and abroad.
If you wish to find out how to file your corporation tax than you should read How to File a CT600 Online.
