In the United Kingdom, corporation tax is levied on the profits of limited companies and other bodies. The standard rate of corporation tax is 19%, although there are a number of reliefs and allowances which can reduce this amount.
Corporation tax is a complex area of tax law, and this guide is intended to give a basic overview of the UK corporation tax system for small companies. It is not intended to be a comprehensive guide, and professional advice should be sought in relation to specific circumstances.
That said, let’s delve into corporation tax and what you should know about it as a small business.
What Makes up Corporation Tax?
The first thing to note is that in the UK, corporation tax is not a single tax but is actually made up of several different taxes. The main taxes which make up corporation tax are:
– Income tax
– Capital gains tax
– National insurance contributions
Income tax is levied on the profits of a company, while capital gains tax is levied on the sale of assets such as property or shares. National insurance contributions are also payable on the profits of a company.
What Can I Do to Reduce Corporation Tax?
There are a number of things that companies can do in order to reduce their corporation tax bill in the UK. One of the most important things is to make sure that they are taking advantage of all of the reliefs and allowances that are available to them.
Some of the most common reliefs that are available include the research and development tax credit, the enterprise zone relief, and the enterprise investment scheme. These reliefs can all help to reduce a company’s corporation tax bill.
Another way to reduce corporation tax is to make sure that the company is efficient in its use of energy. This can be done by making sure that the company uses energy-efficient equipment and by making sure that it takes advantage of any tax breaks that are available for energy-efficient businesses.
Finally, it is also important to make sure that the company is paying its taxes on time. This can be done by setting up a direct debit for corporation tax payments or by using an online service to make the payments.
When Is the Corporation Tax Due, and Are There Any Penalties If I Miss It?
The corporation tax is due in the UK on the 1st of April, and there are penalties if you miss it. The penalties are as follows:
– A surcharge of 5% of the tax due if you pay more than three months late
– A surcharge of 10% of the tax due if you pay more than six months late
– A surcharge of 20% of the tax due if you pay more than twelve months late
If you don’t pay your corporation tax, the HMRC can take action against you. This can include sending you a bill for the amount you owe, plus interest and penalties. The HMRC can also take action to recover the money you owe, such as using bailiffs to seize your assets or taking money from your bank account.
If you’re having difficulties paying your corporation tax, you should contact the HMRC as soon as possible to discuss your options.
Conclusion
All in all, corporation taxes are just one of the many taxes you have to account for in your business. However, thoroughly understanding it not only to ensure you pay for it but also pay for it on time and maximise reliefs can help save you a lot of trouble and money! So, if you need help getting on top of your corporation tax, it is vital to work with accounting professionals to meet your needs at all times.
Accountants247 offers effective, affordable, and high-value solutions to meet the needs of any business. If you are looking for an accountant to work with in Warrington, get in touch with us today!
