Understanding taxes is essential for running a business, especially for a limited company. This guide simplifies the main taxes and their payment timelines for limited companies.
Corporation Tax: What and When?
What is Corporation Tax?
Unlike sole traders, limited companies do not pay personal income tax. Instead, they pay a tax based on their profit after taking away allowed expenses and salaries. This is called Corporation Tax.
How Much?
Well, it depends sadly. A small profits rate of 19% is in place for companies with profits of £50,000 or less.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate.
Corporation Tax main rate for non-ring fence profits would increase to 25%.
When to Pay?
Every year, you'll fill out a CT600 form online showing your company's profits, expenses, and salaries. Once you submit this form, you get 9 months and 1 day to pay the calculated Corporation Tax to HMRC.
VAT (Value Added Tax): What and When?
What is VAT?
If your company's yearly turnover is £85K or more, you need to register for VAT. If it's less, you can still choose to register. This tax is based on the amount charged to your customers minus any VAT the company spent.
How Much?
The usual rate is 20%.
When to Pay?
Every 3 months, you'll need to give HMRC a VAT return and pay any VAT you owe. This is due 1 month and 7 days after your quarter end.
Employers' National Insurance Contributions: What and When?
What is it?
If your company employs people, including you as a director, you need to pay National Insurance contributions (NICs). For the year 2022-24, the rate is 13.8% for employees earning more than £9,096. But, if your business qualifies for Employment Allowance, you might reduce your NICs by up to £5,000.
When to Pay?
You calculate these contributions when running your payroll, typically monthly. You should send the data to HMRC before paying your staff. HMRC then expects the taxes between the 6th and 22nd of the next month.
Other Taxes to Note
Beyond the main taxes above, directors of limited companies must also handle personal taxes through a yearly Self-Assessment tax return.
Need More Help?
HMRC's website is the best place for more details and guidance. Meeting with a local accountant, especially when starting, can also help you understand and manage your company's taxes. We always reccomend reaching out to one of our accounts for any further support or questions you have!
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