If you run a business in the UK then you might need to submit a Company Tax Return and pay Corporation Tax on the profits that you make. Tax can be a tricky subject, so our article goes into more detail, and covers:
Corporation Tax is normally payable by all limited companies incorporated in the UK. There are other organisations which might also need to pay it, even though they’re not incorporated (set up as a limited company):
Members clubs, societies, and associations
Groups of individuals carrying out a business (such as co-operatives)
Other types of businesses, such as sole traders and partnerships, won’t pay Corporation Tax. Instead, you’ll need to submit a Self Assessment tax return, and pay Income Tax on the profits that you make.
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What type of tax return do I need for Corporation Tax?
You’ll need to submit a Company Tax Return in order to pay Corporation Tax if you operate a limited company. HMRC will use the information that you submit to work out how much Corporation Tax you owe.
Do I still need to submit a tax return if my company made a loss?
Yes, you should still submit your Company Tax Return, even if you don’t have any tax to pay this year. This is because HMRC won’t know what you owe until they receive your tax return, so you might simply get a fine if you don’t tell them!
Will I need to send a Company Tax Return for a dormant company?
You don’t need to submit a Company Tax Return for a dormant company.
The definition of a dormant company for Corporation Tax purposes is a bit different to the one used by Companies House. As long as your company isn’t actively trading or liable for Corporation Tax, then it’s dormant.
You must tell HMRC that your company is dormant!
Otherwise, they’ll expect to receive a Company Tax Return from you, and you might receive a penalty for not submitting one.
Trading doesn’t just mean making sales, and can actually refer to any sort of business activity – even placing an advert!
You’ll need to sign into your business tax account to register for Corporation Tax, using your Government Gateway ID to sign in. You’ll also need your company’s Unique Taxpayer Reference (UTR).
What should I include in my Company Tax Return?
A complete Company Tax Return consists of several key pieces of information, including:
A CT600 form
The company’s accounts for the financial year your return relates to
The company’s computations (this is the information which explains the figures you include in your return)
Any supplementary documents
Should I include my overseas profits on my CT600 tax return form?
If the company is based in the UK, it will be liable for Corporation Tax on all of the profits that it makes, wherever they originate. If the company is based overseas but trades through a branch or office in the UK, only the taxable profits in the UK will be liable for UK tax.
The deadline for submitting your Company Tax Return is 12 months following the end of the financial accounting period that it relates to. You might sometimes hear this referred to as the statutory filing date.
What’s the deadline for paying Corporation Tax?
The deadline for paying your Corporation Tax is nine months and a day following the end of the accounting period that it relates to. Not a typo – the deadline for paying the bill really is earlier than the deadline for submitting the tax return!
How do I pay my company’s Corporation Tax bill?
You can pay your tax bill online, through online banking, or over the phone. You can normally only pay through a branch of your bank if you have a paying-in slip from HMRC.
Don’t forget to quote the Corporation Tax payment reference which relates to the accounting period you’re paying for.
You can find this on the ‘notice to deliver your tax return’, any reminders from HMRC, or by signing into your company’s HMRC online account. Choose ‘view Corporation Tax statement’, ‘accounting periods’, then select the correct period. The reference number you need is 17 characters long, for example 1234567890A01234B. It is not the same as your company registration number!
Is a Company Tax Return the same as submitting accounts?
No, the company tax return and the company accounts are two separate things. The company tax return goes to HMRC, who will then calculate and collect the Corporation Tax the company owes.
Your company accounts go to Companies House, who file them with your record for public viewing.
How much is the Corporation Tax rate in 2023/24?
The way that businesses pay Corporation Tax is changing, and from 1st April 2023 limited companies will pay tax depending on which rate they’re eligible for:
Companies reporting profits of…
Pay Corporation Tax at a rate of…
Small profit rate
Less than £50,000
Main profit rate
More than £250,000
HMRC say that the thresholds are proportional to the number of associated companies that your company has. So, if your company has a further 3 other associated companies, that makes a total of 4.
That means that the limits are divided by 4, so the threshold for the small profit rate becomes £12,500 and the limit for the main profit rate becomes £62,500.
Marginal Relief will adjust the rate of Corporation Tax for companies who report profits between these thresholds.
Marginal Relief for Corporation Tax
You might be able to claim Marginal Relief if your company’s annual taxable profits from 1st April 2023 are between £50,000 and £250,000. You won’t be able to claim Marginal Relief for:
A non-UK resident company
A close investment holding company
A company whose profits (including distributions from unrelated, un-associated companies) are more than £250,000
How do I work out Marginal Relief for Corporation Tax?
The easiest way to work out how much Marginal Relief is available to you is probably with HMRC’s online calculator, but our table below shows how the calculation works on a basic level. In our example the limited company:
Has taxable profits of £70,000
Didn’t receive any distributions (such as dividends from an investment that the company made)
Doesn’t have any associated companies
Is submitting a tax return which covers a full financial year
The point at which companies start paying the main profit rate
The company’s total taxable profit for the financial year
Upper limit minus taxable profit
£250,000 – £70,000
Marginal Relief fraction
This is the difference between the main profit rate (25%) and the small profit rate (19%), expressed as a fraction.
It’s used to provide a gradual increase in the rate of Corporation Tax between the two.
Normally shown as a fraction (3/200), we’ll show the decimal equivalent to make the calculation easier to understand.
Marginal Relief available
£180,000 x 0.015
Corporation Tax before Marginal Relief
£70,000 x 25% Main Profit Rate
Corporation Tax after Marginal Relief
£17,500 – £2,700
In this case, the effective rate of Corporation Tax is 21.14%, illustrating how there’s a gradual increase in the rate between 19% and 25%.
How can I reduce my Corporation Tax bill?
The good news is that there are several ways you can reduce your Corporation Tax bill, and they’re absolutely allowed!
Pay yourself a salary
Salaries are an allowable expense, which means you can offset them against your profits in order to reduce your Corporation Tax bill. It’s why paying yourself a small salary can be a tax efficient way to take money out of the business.
Pension payments that your company makes on behalf of directors are also deductible, whilst helping you save for the future.