Starting up:
Corporation tax
If your business is in a company, then the company will pay corporation tax on its profits and must make an annual self assessment return to HM Revenue & Customs.
Company directors are employees of the company. The company must pay employer's Class 1 NIC and the directors must pay income tax and employee's NIC on any salary. These costs are allowable deductions in calculating the profits of a company.
The company will prepare accounts showing a profit figure, which must be adjusted to arrive at the taxable profits. Tax relief is not available for all of the company's expenses that are included in its profit and loss account. For example, relief for capital expenditure, such as the cost to the company of buying a computer or car, is given in the form of capital allowances and any depreciation included in the accounts is not allowed.
Profits after tax can be distributed to shareholders as dividends. Corporate shareholders do not pay tax on dividends received but individual shareholders are taxed on dividends received.
- Business expenses
- Tax relief on company assets
- What are benefits in kind?
- How is corporation tax calculated?
Usually the corporation tax return needs to be filed within one year of the end of the accounting period, and a fine of £100 will be charged if you are late, rising to £200 if the return is more than 3 months late. Generally, however, the corporation tax needs to be paid within 9 months and 1 day of the end of the accounting period, except for large companies, which must pay their tax by quarterly instalments.
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Where next?
Within Starting up ...
- Developing your business idea
- Your business structure
- Setting up
- Accounting systems
- Payroll and PAYE
- National Insurance contributions
- VAT
- Income tax
- Contact us about this issue
- Read about how we can help you & your family
- Request a meeting with us
