We understand that it can be tedious and sometimes challenging for a business to maintain its bookkeeping, pay taxes, and keep up to date with VAT regulations and on top of that run a successful business. So, here we’ve included a step by step guide on how to pay your business’s Corporate Tax.
What is Corporate Tax?
Corporation Tax is a form of tax that corporations have to pay on their profits. Corporation Tax applies to limited companies, clubs, societies, associations, and other unincorporated bodies. Corporation tax is quite similar to Income Tax but without the tax-free personal allowance. As soon as a business starts generating profits they will then be required to pay Corporate Tax on it.
Corporate Tax rates
The Corporation Tax rate for 2019/2020 is currently set at 19% for the rate on profits below/above £300,000. The Corporation Tax rate on profits below £300,000 was 20% for the financial year 2013 – 2016, and between 2017 -2018 there was a 1% decrease to 19% which is expected to remain until 2020.
For the main rate on profits above £300,000, the Corporation Tax rate was previously 23% for the financial year 2013/2014. Also, in 2014/2015 there was a 1% cut which reduced the rate to 21% and from 2015 – 2018 it was cut further by another 1% which makes 20%. The main current Corporate Tax rate on profits above £300,000 is now 19%.
| Year | Rate on profits below £300 | Main rate on profits above £300,000 |
| 2019-2020 | 19% | 19% |
| 2018-2019 | 19% | 19% |
| 2017-2018 | 19% | 19% |
| 2016-2017 | 20% | 20% |
| 2015-2016 | 20% | 20% |
| 2014-2015 | 20% | 21% |
| 2013-2014 | 20% | 23% |
SB Simply Business, 2018
When does my Corporation Tax have to be paid by?
You need to ensure that your company pays its Corporation Tax that’s applied in your company’s accounting period. Otherwise, you could be fined a penalty. If you are unsure what your accounting period is you can always check via logging into HMRC’s online service. Your corporation tax deadline should be nine months and one day after the previous accounting deadline. If the company has nothing to pay then they are still required to inform HMRC of this, otherwise they will send out payment reminders to you. You can report this to HMRC by filling in a “Nil to pay form” online on their website, or you can attach the payslips on the reminder from HMRC marked “Nil due”.
HMRC state that they don’t issue companies with a Corporation Tax bill, but they do advise you on how to work out how much you owe, how to pay and how to report your tax.
How do I submit my Corporate Tax?
First and foremost you will need to register your company with Companies House if you haven’t already done so. Following that, you will then need to register for Corporate Tax with HMRC. You will then have up to three months to register with HMRC from the starting your business which includes trading, employing, advertising, and renting a property. It is crucial that you register within the given time frame otherwise you may incur a late penalty fee.
When registering with HMRC, you will need to provide your company’s unique 10 digit Taxpayer Reference. You should receive this in the post within 14 days after registering with Companies House. When registering online, you will need to provide HMRC with your company’s registration number, the date you started conducting business, and the date that your annual accounts are made up to. Once you have registered, HMRC should then provide you with a deadline for when your Corporation Tax needs to be paid in by.
There are various ways that you can submit your Corporate Tax payment to HMRC:
- Online/telephone banking
- Direct Debt (If you’ve set one up before)
- Online via debit or corporate card
- At your bank or building society
Please note that you can’t pay Corporate Tax via post, and if you wish to pay by direct debit, then it can take up to 5 working days for HMRC to receive your payment. If your payment date lands on a weekend or a public bank holiday, then we highly suggest that you try making sure that the payment reaches them by the last working day before it. Alternatively, you can try using a faster payment method (GOV.UK, 2019)
If you require any further information or assistance regarding Corporate Tax, please don’t hesitate to contact us on 0161 637 1080.
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