Corporation Tax is one of the taxes a limited company has to pay. It’s paid both on the company’s profits – anything left after business expenses such as rent, utility bills, salaries, etc. have been deducted – and on any gains from selling assets that have increased in value.
Unlike limited companies, sole traders and partnerships don’t pay Corporation Tax, but they all pay Income Tax on business profits and Capital Gains Tax on the sale of assets.
Foreign companies with a UK branch or office must pay Corporation Tax in the UK, along with clubs, co-operatives or other unincorporated associations such as community groups or sports clubs.
What is the Corporation Tax rate?
The Corporation Tax rate isn’t set to change for 2024, but it’s always good to double-check which rate applies to you for your accounting period.
You can check the dates of your accounting period on your financial statements, or on the government's website by signing in to your business tax account.
The corporation tax rates for 2023/24 are:
Profits of £250,000 or more – 25%
Profits of £50,000 or less – 19%
How to pay Corporation Tax?
You don’t get an automatic bill for Corporation Tax, instead, there are a number of things you can do to work it out. Once you have that number, you can report and pay your tax.
The steps you need to take are:
1. Register for Corporation Tax
You must register for Corporation Tax within three months of starting to trade or restarting a dormant business. Often you can register at the same time when you register online with Companies House. If you need to register separately you can do so via the HMRC website.
2. Prepare a Company Tax Return
Once you’ve registered for Corporation Tax, your business will need to prepare and submit a Company Tax Return. Even if you make a loss or have no Corporation Tax to pay, you still need to file a return.
The deadline for filing a Company Tax Return is usually 12 months after the end of your company’s accounting period.
3. Pay any Corporation Tax due
Your business must now either pay the Corporation Tax it owes or report that it has nothing to pay by your deadline. This date depends on the amount of taxable profit the company made but is usually nine months and one day after the end of the company’s accounting period.