Corporation Tax- What you need to Know

Corporation Tax is a tax that all limited companies must pay. It is a tax that is payable against the profits a company makes. In other words, the money your business makes after overheads, salaries and costs of goods sold.

Taxable profits also include any money the business makes from investments and selling capital assets for a profit.

If the company is based in the UK, then Corporation Tax is paid on any profits made in the UK and abroad. If the headquarters is based in a different country then they are taxed only on UK profits.

For the financial year beginning April 2022, Corporation Tax will remain at 19%.

From 1 April 2023, the rate will increase to 25% although this will not be a flat rate. Instead, companies whose profits are over £250,000 will pay the Main Rate of 25%. A Small Profit Rate of 19% will apply to companies whose profits are less than £50,000. Those with profits between will have their tax set at 25% but are eligible for Marginal Relief which is a gradual reduce their effective tax rate.

How do I pay for Corporation Tax

Within three months of incorporating your business with Companies House, you must register your business for Corporation Tax with HMRC. You will need the unique taxpayer reference that HMRC will send you when you registered your business.

After registering, you'll be able to sign into your HMRC account and report your Corporation Tax within your Company Annual Return. HMRC will additionally send reminders of deadlines to the registered office of your business.