When is Corporation Tax Due? Guide to Rates and When to Pay

Limited companies in the UK are obliged to pay corporation tax on their earnings. But what is a corporation tax, when is corporation tax due, what are its rates, and when do you need to pay it? We’ll discuss all these points in this blog.

 

What is Corporation Tax?

It is a tax levied on limited companies in the UK. This tax is similar to income tax but it’s for companies without any personal allowance. As a result, whenever your new business starts making a profit, it has to pay a corporation tax at the rate of 19%, if they’re no losses previously.

You (as a limited company) need to pay this tax on the profits you earn by doing business, trading, sale of assets, investments, chargeable assets, etc.

How to Register for Corporation Tax?

After setting up your limited company, you should first register it with HMRC for corporation tax. You can also register online. Your business should be registered within three months of trading. Trade includes buying, selling, renting a property, advertising and employing someone, etc.

You may be charged with a penalty if you register late for corporation tax. So keep it on the top of your checklist.

What are the Rates of Corporation Tax?

The current corporation tax rate on a company’s profit is 19%. Earlier in 2016-17, it was 20%. This rate depends on the amount of profit you earn as a company. The current government has vowed to keep the corporation tax rate low.

Corporation Tax Rate for Limited Company:

You need to pay the tax rate as per the accounting period of your company. To find the accounting period, visit the government website. This tax is usually in line with the company’s annual accounts and financial statements. Normally the accounting period for most businesses is 12 months.

When is Corporation Tax Due?

It is a complicated stage where payment deadlines differ from other taxes and it’s based on the accounting period:

• Corporation tax needs to be paid before filing your company’s tax return
• After the end of the last tax year, 9 months and 1 day is the time limit to pay this tax
• You should make the company’s tax returns to find out the corporation tax you owe. The time limit to file your company tax returns is 12 months.

Any business having more than £1.5 million will pay their corporation tax in instalments. If the company that you’re running is making a loss without any corporation tax due, you still need to inform  HMRC.

How to Pay Corporation Tax?

You pay corporation tax after knowing how much you owe and how much is due. There are different payment methods to pay this tax:

• Online or telephone banking takes a day or two
• CHAPS works on the same day or the next
• BACS takes three working days
• The direct debit takes three days
• Online by debit or corporate credit card takes three days
• Bank or building society takes three days
• If you’re doing direct debit for the first time it’ll take five days

Quick Sum Up:

We have covered some important details about what is a corporation tax, when is corporation tax due, what are its rates, and how to pay it.

 

Disclaimer: This blog provides general information on corporation tax.