Working out Corporation Tax rate is an integral part of running a business. Yet, there are ways to get allowances, reliefs, and other tax deductions.
In the United Kingdom, the current Corporation Tax rate for company profits is 19% (nineteen percent).
It is important to know your company 'accounting period' for Corporation Tax.
You will pay your Corporation Tax bill at the rates that applied to those set periods of trading.
But, you may be able to apply deductions or claim tax credits against the amount of Corporation Tax you owe.
These types of deductions are also called allowances and reliefs (see below).
Note: Different Corporate Tax rates apply to the profits of 'ring fence companies' (e.g. involved in oil rights or extraction in the UK).
The size of company profits determines the corporate rate to pay from before the 1st of April 2016. You work out your profits when preparing accounts and tax returns for a limited company.
Were your profits between £300,000 and £1.5 million before the 1st of April 2015? If so, you may claim Marginal Relief as a way of reducing your Corporation Tax bill.
The small profits rate and the main rate are for a complete year. In fact, the thresholds would reduce in line with an accounting period.
So, an accounting period of six (6) months would reduce a £300,000 small profits threshold in half to £150,000.
According to the rules of Corporation Tax one company is associated with another company if (either rule applies):
If this is the case, it would mean that they have a shared tax threshold. So, you would divide the threshold by four (4) if one company owns three (3) others, for example. The small profits threshold would become £75,000 for each of the companies.
In this case, you would work out how many days each rate applied, then calculate the tax due for each of them.
You will be able to deduct the costs of running the business from the profits before tax. This is part of the process where you prepare your company accounts.
But, if there is anything that you or your employees make personal use of (e.g. a computer) you must treat it as expenses and benefits for employers.
Note: You cannot claim all expenses for Corporation Tax purposes (e.g. entertaining a client). Some would need adding back to the profits when you prepare a Company Tax Return.
You would be able to claim capital allowances on assets bought to keep for use in the business. Typical examples of claimable assets include:
In certain circumstances you might be able to make a claim or election for:
There are some restrictions if you are going to claim Marginal Relief. The trading company must have had profits between £300,000 and £1.5 million that were either from before 1st of April 2015 or from oil rights or extraction in the UK or the UK continental shelf.
The Marginal Relief calculator can help you work out how much Marginal Relief you can claim on your Corporation Tax bill. As a rule, the company profits must be between £300,000 and £1.5 million.
Rates and Allowances for Corporation Tax in United Kingdom