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What is Corporation Tax?

Corporation Tax is a tax paid on the profits made by limited companies.

It is paid directly to HMRC. Corporation Tax also applies to non-British companies with a UK branch or office and certain clubs, associations, charities and other organisations.

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Who needs to pay Corporation Tax?

Every limited company based in the UK must pay corporation tax on all their profits, including profits made overseas. You must register to pay corporation tax within the first three months of trading as a limited company.

Companies based outside the UK only pay corporation tax on income received in the UK.

It is the company that is legally required to pay Corporation Tax. In practice this means that the owner or director of the company must ensure that it is paid.

How much Corporation Tax do I need to pay?

The rate of corporation tax payable on taxable income varies according to the amount of profit a company makes. Your company pays corporation tax on all taxable profits at a current rate of 19%.

Different financial years often have different corporation tax rates. For example, the 2016-17 tax year corporation tax rate was 20%. If your accounting period crosses two tax years, you simply work out how many days of your accounting period fall into each year and apply the respective rates.

Companies in certain industries, such as oil extraction, may have ‘ring-fenced profits’, which are taxed at different rates.

How do I pay Corporation Tax?

If your company is liable for Corporation Tax, or you think it might be, you should inform HMRC.

You register for corporation tax online with HMRC. You must already have your business’s unique taxpayer reference number (UTR) to start the registration process. HMRC sent this UTR number to you when Companies House approved your application to become incorporated.

The CT600 is what HMRC call your Company Tax Return for Corporation Tax. This must be sent with a full set of company accounts and all other extra calculations and/or supplementary pages. The process can get quite complicated and expert consultation is advisable.

HMRC have set up several different ways to pay your corporation tax bill. You need to bear in mind their administrative times in order to make sure that you don’t miss a deadline. The only way you can’t pay is by post.

Ways to pay

  • New direct debit: 5 working days
  • Existing direct debit: 3 working days
  • Bacs transfer: 3 working days
  • Online payment using debit or corporate credit card
  • in person at the building society or bank: 3 working days
  • Telephone or online banking: same or next day
  • CHAPS: same or next day
  • You can submit your company’s tax return online, and pay the tax you owe electronically.

  • Corporation tax is usually due within nine months and one day of the end of the tax year. Larger companies may pay tax quarterly over an extended period.

For further Tax information, please follow the links below:

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  • Pension Tax includes:
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  • Inheritance Tax includes:
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  • Capital Gains Tax includes:
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Tax Refunds

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