Corporation tax and rates

What is corporation tax?

Corporation tax is payable on the taxable profits of limited companies. Taxable profits are made up of profits from trading and most investments, along with any ‘chargeable gains’ made by the company, which is the term used when a company makes capital gains.

As a contractor, freelancer, or consultant, your company profit is, broadly speaking, the company income before VAT less company expenses.

For companies based in the UK, corporation tax is applied to all taxable profits, no matter where in the world the profit was made.

What are the corporation tax rates?

Historically there have been two rates of corporation tax: for smaller companies with a profit of £300,000 or less the ‘small profits rate’ is applied, and for companies with a profit of £1.5 million or more the main rate of corporation tax is applied.

From the 1 April 2015 there is a single corporation tax rate, the main rate at 20%. From the 1 April 2017 this rate was reduced to 19% which also remains the current rate for 2019, and is due to fall again to 17% from the 1 April 2020, as announced in the 2016 Budget.

What does a company need to do for corporation tax?

A company has several obligations with regards to corporation tax and the main points are as follows:

• A company must tell HMRC within 3 months of starting to trade that it is liable to corporation tax.
• Corporation tax must be paid by nine months and a day following the end of the company’s corporation tax period.
• A corporation tax return must be submitted by 12 months after the end of the company’s corporation tax period.
• Helping you to meet your company’s corporation tax obligations is part of Integro Accounting’s fixed fee service.