Guide to Corporation Tax

Guide to Corporation Tax

If you run a limited company, you need to know about Corporation Tax. We take you through when you need to pay and how to do it step by step.

When do I need to pay Corporation Tax?

If your business is a limited company, then you will need to pay Corporation Tax. You’ll also need to pay Corporation Tax if you have a foreign company with a UK branch or office, or run a club, co-operative or other unincorporated association.

How much is Corporation Tax?

The Corporation Tax rate is fixed at 19% for non ring fence profits. A ring fence company makes profits from oil extraction or oil rights.

You pay Corporation Tax on taxable profits, which include your trading profits, investments and selling assets for a profit (chargeable gains). If you’re a UK company, you pay Corporation Tax on all profits including those from abroad. If you have a foreign company with a UK branch, you just pay Corporation Tax on profits from UK activities.

How to file a Company Tax Return

First, you need to register for Corporation Tax with HMRC. Then keep the right records while you run your business. You can read more about which records you need to keep in our guide to running a limited company.

Before you pay your Corporation tax you need to file a Company Tax Return. This will tell you how much tax you need to pay. You file your Company Tax Return on the HMRC website.

To prepare your tax return you’ll need your company’s annual accounts which must be balanced. To do this, you’ll need your:

  • Balance sheet
  • Profit and loss report
  • A director’s report, if you’re not a micro-entity

How do I pay Corporation Tax?

If you have taxable profits of up to £1.5 million you have to pay your Corporation Tax 9 months and 1 day after the end of your accounting period. If your profits are above that limit, you need to pay by instalments.

Accounting software for limited companies

Using an accounting software is the perfect way to keep the records you need as a limited company.

Bokio is a free accounting software that lets you do your bookkeeping, invoicing and expenses all in one place. Our automated reports include the balance sheet and profit and loss sheet you need to file your annual accounts. Bokio is Making Tax Digital compliant, so you can submit an automated VAT Return to HMRC in just a few clicks.

We make managing your finances simple so you can get back to running your business.