Current Corporation Tax Rate for Limited Companies in the UK

Setting up a small business in the UK needs hard work and commitment, and how beautiful the time is when your business is growing and generating profits. However, while running a small business in the UK, these profits bring along corporation tax. If you are a new businessman and unaware of the corporation tax rates for limited companies, you must read this article for all related information.

 

What are the Current Corporation Tax Rates for Limited Companies in the UK?

Corporation tax refers to the tax amount corporations pay on the profits they earn during a financial year. The corporation tax paid by the companies helps generate revenue for the government. In the UK, companies pay the corporation tax to HM Revenue and Customs (HMRC) while filing a tax return for a financial year. The amount of corporation tax paid by the companies depends on the amount of profit earned in a financial year. In the UK, corporation tax must be paid on profits earned during a financial year

• If operating as a limited company in the UK
• Operating as a foreign company with a branch or office in the UK
• Operating as a club or a cooperative organisation, for example, doing business as a sports club

As the corporation tax rate for limited companies is based on the profit earned in a year, companies have to work out the correct corporation tax amount while filing tax returns.

What are the Profits on Which Corporation Tax is Paid in the UK?

Below are details of profits on which companies are liable to pay corporation tax. This criterion is set by the HMRC. The taxable profits are earned from

• Doing business
• Investments in business across the UK
• Selling your assets for amounts more than their original costs. Assets can be property, vehicles,

If the main branch of a company is based in the UK, then it is classed as a UK-resident company, and the company is liable to pay corporation tax on all profits earned in a financial year through its main branch and other branches situated abroad.

On the other hand, if the company is a non-UK resident, then the company is liable to pay corporation tax on the profits earned from its activities in the UK.

How to Ensure Managing Corporation Tax in the UK?

To pay the corporation tax rate for limited companies in the UK, the companies should associate the corporation tax services with their business account. This helps businesses to file and track their tax returns online.

Other than limited companies, if you are operating as a club cooperative or an unincorporated organisation, then you must register for corporation tax before starting your activities.

In the UK, companies working in the domain of oil extraction or oil rights are called ring fence companies. There are different corporation tax rates for these companies. However, the UK government has some relaxation for businesses going into a loss or not making any profit. They are categorised as dormant for corporation tax.

What is the Current Rate of Corporation Tax?

According to HMRC, the corporation tax rate for limited companies in a financial year is divided into the following categories:

• Small profits rate: Limited companies with annual profits of £50,000 fall in this category. In the UK, these companies are liable to pay 19% corporation tax
• Main rate: According to HMRC, limited companies doing business of £250,000 are included in this category. These companies pay a 25% annual corporation tax on their profits. Ring-fence companies pay 0% tax on all profits except ring-fence profits.
• marginal relief (lower limit): According to HMRC, the lower limit for marginal relief for limited companies is £50,000 for the financial year 2024 onwards.
• Marginal relief (upper limit): According to HMRC, the upper limit for marginal relief for limited companies is £250,000 from the financial year 2024 onwards
• Standard fraction: the standard fraction of corporation tax set by HMRC for the financial year 2024 onwards is 3/200.
• Special rate: This category is designed by HMRC for unit trusts and open-ended investment companies doing business in the UK. The special rate set by HMRC for the financial year 2024 onwards is 20%.

What is the Corporation Tax on Chargeable Gains?

This refers to the situation when you are selling your assets. If you are selling your business or related asset for profit, then corporation tax is imposed by the HMRC.

 

Conclusion

The corporation tax rate for limited companies refers to the tax paid by the company on its yearly profits at the end of the financial year. There are different categories designed by HMRC to maintain a smooth flow of corporation tax and also give relief to businesses across the UK. Companies pay corporation tax according to the small profit rate, main profit rate, marginal relief (lower and upper limit), and special rate. The oil extraction companies are given special relief by HMRC.

Disclaimer: All the information provided in this article on corporation tax rates for limited companies, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.