Do you own a limited company? If yes, then corporation tax is not a new topic for you. On the other hand, others may consider it same as other taxes. So, here is a brief note on what corporate tax is, how and when should it be paid.

What is corporation tax?

It is a tax which the limited company must pay on its taxable profits. However, the rate on which you have to pay the tax depends on the profit you have created.

Within the three months of the start of your company’s accounting period, you must set up for corporation tax.

Along with the limited companies, corporation tax also applies for unincorporated associations and companies with a UK office.

If you have company with annual profit of £300,000 or less, you should pay at the small profits rate of 20%. While the same rate applies to the companies with profits of £1.5 million or more from 1 April, 2015, the previous rate was 21%.

If your profits fall between £300,000 and £1.5m before 1 April, 2015, you can apply for marginal relief, which helps in reducing your corporation tax bill.

How should I pay Corporate Tax?

You do not get a corporate tax bill. That’s why you need to know how much your company owes. Checking out your deadlines for filing Company Tax Return, preparing annual accounts for working out company’s taxable profits, and checking reliefs for claiming taxable profits are the steps you need to do follow for paying such tax.

According to HM Revenue & Customs (HMRC), corporate tax must be paid electronically not by the post. By electronically, you can use debit or credit card by signing up with BillPay. However, using credit card for payment will incur you a charge of 1. 4%.

When making payments, providing right debit or credit card details and corporation tax payment reference is a very important. Another important thing is you need to ensure you pay the tax before hitting the deadlines. Even though when you have nothing to pay, you should inform HMRC before the payment deadlines.

When should I pay Corporate Tax?

The payment deadline is different from income tax and VAT for such tax. You first need to pay corporation tax before you file your company tax return.

Within the nine months and one day after the end of accounting period for your previous financial year, you need to pay the corporate tax. When your accounting period comes to an end on March 31, corporation tax must be settled by January 1 the following year.

If you any issues regarding corporate tax, our tax accountants can provide you expert advice on this matter. Call 020 7060 9556 for more details.