Business Taxation Overview

Corporation Tax 

You must pay Corporation Tax (CT) on profits generated from doing business as:

  • a limited company

  • any foreign company with a UK branch or office

  • a club, co-operative or other unincorporated association, eg a community group or sports club

You don’t get a bill for CT. There are specific things you must do to work out, pay & report your tax.

  1. Register for CT when you start doing business or restart a dormant business. Unincorporated associations must write to HMRC.

  2. Keep accounting records & prepare a CT Return to work out how much CT to pay.

  3. Pay CT or report if you have nothing to pay by your deadline - this is usually 9 months & 1 day after the end of your ‘accounting period’.

  4. File CT Return by your deadline - this is usually 12 months after the end of your accounting period.

Accounting period is normally the same 12 months as the financial year covered by the annual accounts.

Taxable profits for CT Tax include the money your company or association makes from:

  • doing business (‘trading profits’)

  • investments

  • selling assets for more than they cost (‘chargeable gains’)

If your company is based in the UK, it pays CT on all its profits from the UK & abroad. The CT rate for company profits is currently 19%.

Allowances & Reliefs

You can deduct the costs of running your business from your profits before tax, when you prepare your company’s accounts. Anything you/your employees get personal use from must be treated as a benefit.

Some expenses are not allowed for CT, for example entertaining clients - add these back to your profits when you prepare your Company Tax Return.

VAT Overview
You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months. This period of time is known as your ‘accounting period.’

The VAT Return records things for the accounting period like:

  • your total sales and purchases

  • the amount of VAT you owe

  • the amount of VAT you can reclaim

  • what your VAT refund from HMRC is

You must submit a VAT Return even if you have no VAT to pay or are looking to reclaim.

If your taxable turnover goes over the VAT registration threshold, you must register for VAT. You need to keep digital VAT records & use software to submit VAT Returns. The current VAT registration threshold is £85,000. VAT taxable turnover is the total value of everything you sell that isn't exempt from or outside the scope of VAT.

Accounting Schemes

The 3 most popular schemes are:

  • Flat Rate Scheme

  • Cash Accounting Scheme

  • Annual Accounting Scheme

VAT Rates for Goods & Services

Standard rate             20% 

Reduced rate               5%

Zero rate                     0%