Hello NewcoIt's charged on profit, not turnover
Corporation Tax is worked out on your taxable profit: income less allowable costs, with some adjustments. A company that turns over £100,000 but spends £80,000 running the business pays tax on roughly £20,000, not £100,000.
The rates
| Taxable profit | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 to £250,000 | 25%, reduced by marginal relief |
| Over £250,000 | 25% (main rate) |
The £50,000 and £250,000 limits are shared between associated companies and cut down for accounting periods shorter than 12 months.
Pay and file: two different deadlines
- Pay 9 months and 1 day after the end of your accounting period.
- File your Company Tax Return within 12 months of the end of the accounting period.
Yes, you usually pay before the return is due. Plan your cash for it.
A long first year means two tax periods
A company's first accounts can cover more than 12 months, but an accounting period for Corporation Tax can't. If your first year is longer, you'll have two tax periods: the first 12 months, then the rest. Each has its own return and its own payment date.
Late filing costs money
File your return a day late and the penalty is £200. It rises if the return is more than 3 months late, and after 6 months HMRC can add a percentage of the unpaid tax. Late payment also attracts interest.
Quick answers
Is Corporation Tax charged on turnover or profit?
On taxable profit: income less allowable costs, with some adjustments. A company that turns over £100,000 and spends £80,000 pays tax on roughly £20,000.
What are the Corporation Tax rates?
19% on profits up to £50,000 (small profits rate), 25% on profits over £250,000 (main rate), and 25% reduced by marginal relief in between. The limits are shared between associated companies and reduced for periods shorter than 12 months.
When is Corporation Tax due?
Payment is due 9 months and 1 day after the end of the accounting period. The Company Tax Return is due 12 months after the end of the period, so you usually pay before you file.
What if my first accounts cover more than 12 months?
You will have two Corporation Tax periods: the first 12 months, then the rest. Each has its own return and payment date.
What is the penalty for filing a Company Tax Return late?
£200 for a return one day late, rising if it is more than 3 months late. After 6 months HMRC can add a percentage of the unpaid tax, and late payment attracts interest.
Video transcript
Read what's said in the part 3 video
Part three: Corporation Tax. What your company pays, and when.
One: it's a tax on your company's profit, not its turnover. Broadly, that's your income minus allowable business costs.
Two: the rates. Profits up to £50,000 are taxed at 19%. Over £250,000, it's 25%, with a sliding scale in between.
Three: the deadlines. Pay the tax nine months and a day after your accounting period ends, and file your company tax return within twelve months.
Four: watch out in year one. A tax period can't be longer than twelve months. If your first accounts cover more, you'll file two returns, with two payment dates.
File late and there's a £200 penalty, then another £200 at three months.
This is general information, not advice. Follow for part four: what you can put through the company.