Understanding the Essentials of Corporation Tax for Limited Companies
Corporation Tax – what is taxable?
Corporation Tax is payable by LTD companies, clubs, charities, associations, cooperatives and societies. The tax is paid on all profits that are subject to taxation, primarily on business income, investment gains and capital gains.
It is important to emphasize that if the company is registered in the UK, where the profits are generated, even if it is in a remote corner of the world, does not matter.
Tax must be paid on all taxable profits. The situation is different when a company operates in Great Britain but is registered outside the United Kingdom. Corporation Tax is then payable only on profits resulting from activities conducted in the UK.
Corporation Tax settlement – accounting office in the UK
The tax year in the UK runs from April 6 to April 5 of the following year, but in the case of Corporation Tax, different dates are indicated. For companies and organizations that are Corporation Taxpayers, the financial year runs from April 1 to March 31 of the following year.
The differences are small – the shift is only a few days, but when settling taxes, every day and every amount matters. If we are not sure how, when and from what period we should settle our accounts, as well as whether we should pay Corporation Tax on all profits, a Polish accounting office will be helpful.
It is best to choose an accounting office in the UK that offers accounting services for LTD companies in the UK.
A LTD company is one of the most popular forms of doing business in the UK, which is why every accounting office offers assistance in settling this type of business. Corporation Tax must be paid, but a Polish accounting office can carry out tax optimization of the company and reduce the company’s operating costs in Great Britain. The final results of such optimization will be available after the end of the financial year and submission of the settlement. Settlement for the first year of operation of the Limited company takes place 12 months after the company’s registration. The tax return must be submitted within 9 months of the end of the financial year.
Tax settlement in the UK and company accounting
Corporation Tax is a fixed tax – in this case, no thresholds are specified that could exempt you from paying the obligation. Certain changes in this respect will come into force from April 1, 2023. At this time, each taxpayer must transfer the calculated amount to HMRC. However, before settling the tax, the entrepreneur should take care of other formalities.
The first step is to register for Corporation Tax – this applies to both starting a new business and resuming an inactive business. Then it is necessary to keep the company’s accounting and archive all issued and received financial documents. Next, you need to prepare an annual tax return, based on which the exact amount of tax will be calculated. To avoid severe financial penalties, the tax should be paid on time and then submit the previously prepared tax return to the appropriate institution.
Corporation Tax rate from April 2023
The Corporation Tax rate is 19% – a level it has remained at for a long time. However, from April 1, 2023, significant changes will be implemented. The rate will increase from 19 to 25%. Fortunately, entrepreneurs can deduct some costs or receive tax relief. A new system will be introduced in April, under which the amount of Corporation Tax will be linked to the amount of annual profits achieved.
The current rate of 19% will apply to companies with profits of £50,000 or less.
