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A brief overview of corporate tax in UK

Corporate tax is the tax levied on the taxable profits of limited companies and other business entities, including unincorporated bodies, societies and clubs. The taxable profits levied under corporate tax include capital gains, also known as ‘chargeable gains’ and profits from taxable income like investment profits and trading profits. If you own a company or organisation in the UK, you will be required by law to pay corporation tax on all your taxable profits irrespective of where in the world your profits come from.

Corporation Tax financial year

The UK corporation tax year, also called ‘fiscal year’ or ‘financial year’ runs from 1 April to 31 March for purposes of corporate tax collection. It is important to note that the corporation tax year is different from the individual tax payers’ year, which runs from 6 April to 5 April.

Corporation Tax rates and various other credits, allowances and reliefs are set in the Budget by the Chancellor each financial year. Usually, these tax rates and reliefs are set in the month of March or April, although they may also be set in the Pre-Budget Report the previous November or December.

Announcements of any changes to the tax rates are normally made one or more years ahead of the year to which the changes will apply. This affords you adequate time to plan for your corporate tax remittance.

Corporation Tax rates

There are two main rates used in Corporate Tax calculations that you may be entitled to, depending on your company’s taxable profits. The first is the upper rate, which is commonly known as the 'full' rate or 'main' rate. The second is the lower rate, which is commonly known as the ‘small profits’ rate.

‘Marginal Relief’ is the corporate tax rate that lies between the upper and lower rates. You are only entitled to the 'Marginal Relief' rate if your company profits fall within certain stipulated limits.

Filing Company Tax Returns

All companies and organisations, with very few exceptions, must file Corporate Tax Returns online. If you own a company or organisation, you will be required to fill your Tax Return in eXtensible Business Reporting Language (iXBRL) format and pay any Corporation Tax dues electronically.

It is your responsibility as the company owner to calculate how much Corporation Tax your company owes and pay it on time. If you don’t remit your Corporation Tax payments on time, your company is liable to face penalties or interest charges.

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