- If you're a limited company, you don't use the same self assessment tax return system. Instead, you pay corporation tax using corporation tax self-assessment.
- You have to calculate the amount of tax you owe yourself.
- You you fill out a company tax return.
- It's well worth getting an accountant to help you with this process.
What you pay tax on as a limited company
You pay tax on your pre-tax profit, otherwise known as your taxable profits, which is the sum of:
- Income from trading profits (sales) less allowable expenses
- Income from renting out land or property
- Interest on money held on deposit
- Capital gains (selling company assets)
- Most other types of income (if you're unsure, call HMRC or check with a tax advisor)
Having added these, you then take off any relevant deductions,
reliefs, losses or allowances.
You then apply the relevant tax rate to calculate your gross corporation tax payable. These are:
- 21% for companies with profit up to £300,000 until March 30 2011, falling to 20% from April 1 2011.
- 28% for companies with profit of more than £1.5m until March 30 2011, then 27% from April 1 2011. It will fall by 1% each subsequent year for the four years after that.
- Somewhere between 21% and 28% for companies whose profits are between £300,000 and £1.5m - the tax rate works on a sliding scale. Ask HMRC to calculate the exact figure for your business.
- HMRC offer an up-to-date table of corporation tax rates.
You can then deduct any relevant tax credits, any income tax
already deducted from interest income, and any corporation tax
you've already paid (if you paid tax early, for example).
How you pay tax as a limited company
The accounting period for limited companies doesn't necessarily coincide with the tax year. It is, instead, your company's own accounting period, beginning and ending with the dates of your financial accounts as you submitted to Companies House.
- You must pay corporation tax within nine months of the end of your company's accounting period
- You must file your tax return within 12 months of the end of your company's accounting period
- Where your accountancy period and the tax year don't coincide and the tax rate has changed from one year to the next, you need to apply the earlier tax rate to all pre-tax profit that came in before the tax rate changed, and the later one to all profit that came in after the change. In other words, all profit must be taxed according to the tax rate that applied when it was earned.
- If your company has taxable profits of more than £1.5m, you have to pay corporation tax in instalments.
Doing it online
- At the moment, you can pay and file your company tax return online or on paper.
- From April 1 2011 you must pay your corporation tax electronically.
- For any accounting period ending after March 31 2010, you must file your company tax return online.
Other tax responsibilities as a limited company
- You're legally obliged to tell HMRC that you're liable for corporation tax - send in form CT41G.
- If your company is 'dormant' - that is, not trading or active - procedures are different. Contact HMRC if this applies to you.
- Set up a PAYE system to pay yourself and any staff and tot deduct the correct tax and NICs from wages. Read our guide on PAYE for more information.