How Do I Pay Corporation Tax?

Corporation Tax is a tax that limited companies in the UK need to pay on their profits. Unlike Income Tax, which is automatically deducted from salaries through PAYE, Corporation Tax is aimed specifically at businesses. If you’re running a limited company, you’ll need to calculate your tax based on your profits, file a return to HMRC, and pay corporation tax by the deadline.

Making sure to pay Corporation Tax before the deadline is important to avoid any financial penalties and interest fees. HMRC imposes fines for late payments, and these can really add up if you’re not careful. Plus, falling behind on payments can hurt a company’s cash flow and tarnish its financial reputation.

All UK-registered limited companies must pay Corporation Tax on their profits. This includes earnings from:

• Trading activities.
• Selling assets like land, property, or shares (capital gains).
• Investments or interest earned.

Corporation Tax applies to:

• Limited companies registered in the UK
• Foreign companies with UK branches that make a profit in the country
• Clubs, cooperatives, and trade associations that generate taxable profits

If a company makes a profit, it must report this to HMRC and pay the correct amount of Corporation Tax. Even if a business does not owe any tax, it must still file a tax return.

Paying Corporation Tax is an important duty for businesses in the UK. If your company turns a profit, you’ll need to figure out how much tax you owe and make sure to pay it to HMRC by the deadline. Here are steps to help you follow the process of paying Corporation Tax correctly.

1. Know Your Corporation Tax Payment Deadline

The deadlines for Corporation Tax depend on your company’s financial year. You’ll need to pay your tax nine months and one day after the end of your accounting period.

For instance: If your accounting period wraps up on 31st March, your tax payment will be due by 1st January of the following year. If your profits exceed £1.5 million, you might have to make payments in instalments.

2. Figure Out How Much You Owe

To determine your Corporation Tax liability, you’ll need to calculate your company’s taxable profits. Taxable profits include:

• Trading profits from your core business activities
• Income from investments like interest or dividends
• Chargeable gains from selling assets such as property or equipment

What Can Lower Your Taxable Profits?

• Allowable business expenses (like wages, rent, and office costs)
• Capital allowances for equipment and machinery
• R&D tax relief if your business invests in innovation

Make sure to keep precise financial records so you can easily track your income and expenses. This way, you’ll be able to report the right amount to HMRC, helping you steer clear of underpaying or overpaying.

3. Get Your Corporation Tax Return Ready

To pay Corporation Tax, you’ll need to fill out a Company Tax Return (CT600). This return informs HMRC about your company’s profits and the tax owed.

Steps to Prepare Your Tax Return:

• Gather Financial Information: Collect all records of income, expenses, and allowances.
• Complete the CT600 Form: Use HMRC’s online portal to fill out the form.
• Submit the Return: Make sure to file the return online by the deadline, even if your company doesn’t owe any tax.

4. Calculate Your Corporation Tax Liability

Corporation Tax rates vary based on your company’s profits. For the 2024/25 tax year:

• 19% if profits are £50,000 or less (small profits rate)
• 25% if profits exceed £250,000 (main rate)
• Marginal Relief applies if profits fall between £50,000 and £250,000.

Use corporation tax calculator to avoid manual calculation and work out the tax you owe in minutes.

5. Pay Your Corporation Tax Bill

Once you’ve figured out how much you owe, you can pay it using one of HMRC’s approved payment methods. Keep in mind that each method has its own processing time, so it’s a good idea to pay early to ensure you meet the deadline.

If you think you might have trouble making a payment, contact HMRC right away to talk about potential arrangements.

HMRC offers different payment methods to pay easily. The best choice for you really depends on how fast you need your payment to reach HMRC.

Same day or next day

• approve a payment through your online bank account
• online or telephone banking by Faster Payments or CHAPS
• online by debit or corporate credit card

3 working days

• Direct Debit (if you’ve set up one for HMRC before)
• online or telephone banking by Bacs
• at your bank or building society

5 working days

• Direct Debit (if you have not set up one for HMRC before)

If your deadline falls on a weekend or a bank holiday, be sure to reach your payment to HMRC by the last working day before that date.

Watch below video from HMRC to know Corporation Tax deadlines and learn how to make payments:

‍

Paying Corporation Tax on time is a crucial aspect of managing a business in the UK. By understanding the deadlines, accurately calculating your tax, and selecting the right payment method, you can get rid of penalties and interest charges. Keeping precise records and planning ahead can also simplify the whole process.

Many business owners find tax regulations to be quite complex, especially when it comes to deductions, reliefs, and fluctuating tax rates. Partnering with an accountant can save you a lot of time and help you dodge mistakes. A skilled accountant can determine your tax liability, file your Company Tax Return, and keep you informed about payment deadlines.

At GoForma, we strive to make Corporation Tax hassle-free. Our team of expert limited company accountants is here to provide comprehensive support for tax calculations, returns, and payments. Whether you’re running a small business or a growing enterprise, we offer tailored services to fit your needs.

Book a free consultation today and let GoForma take the stress out of Corporation Tax for you!

FAQs on Corporation Tax Payment

Can I pay Corporation Tax by Direct Debit?

Yes, you can pay Corporation Tax by Direct Debit. You can set it up through your HMRC online account. It takes about three working days for the payment to process and five days if you are paying through this method for the first time.

What is the deadline for paying Corporation Tax?

The deadline to pay Corporation Tax is usually nine months and one day after the end of your company’s accounting period. For example, if your accounting period ends on 31st March, payment is due by 1st January the following year.

Are directors personally liable for Corporation Tax?

No, directors are not usually personally liable for Corporation Tax. The company, as a separate legal entity, is responsible for paying it. However, HMRC can hold directors personally liable for unpaid Corporation Tax if they believe the non-payment was deliberate. If you can't pay on time, seek professional advice quickly.

Do I need an accountant to submit Corporation Tax?

No, you don’t need an accountant to submit Corporation Tax. You can file it yourself through HMRC’s online service. However, an accountant can help with accurate calculations and meeting deadlines.

How do I get a repayment of Corporation Tax?

You can get a repayment of Corporation Tax if you have overpaid. HMRC will refund it automatically or you can request it through your company’s HMRC online account. Refunds are usually paid by bank transfer.

Can I pay Corporation Tax at the post office?

No, you cannot pay Corporation Tax at the post office.

Can I pay corporation tax in instalments?

Yes, you can pay Corporation Tax in instalments if your company’s taxable profits are over £1.5 million. If you’re struggling to pay, you can contact HMRC to arrange a Time to Pay plan.