The 2021/22 tax year commences today — 6th April 2021. With a new tax year come the new tax rates and allowances. But due to the pandemic and the current state of the economy, there has not been a great significant change in the rates and allowances for this tax year compared to the previous years.
One of the most important taxes a business has to pay is the Corporation Tax. Here’s a quick guide to understanding corporation tax, the tax changes for this year, how to pay and when to pay corporation tax.
What is Corporation Tax?
Corporation tax is paid by businesses and is calculated on their profits, in a similar way to income tax for individuals. You must pay Corporation Tax on profits from doing business as:
What are the tax corporation tax changes?
The corporation tax rate will increase to 25%, a 6% increase from the current 19%. However, this change will not take effect until April 2023.
Is the change applicable to everyone?
Not everyone will be affected by this change. In order to protect small businesses, the Small Profits Rate (SPR) will also be introduced. This means that if your company makes profits of £50,000 or less, then you will continue to pay Corporation Tax at 19%. There will also be a taper above £50,000 profits so that only those businesses with profits greater than £250,000 will be taxed at the full 25% rate.
How to pay Corporation Tax?
You have to register your business for Corporation Tax with HMRC. Registration should be done within three months after incorporating your business with Companies House, unless it is dormant.
When to pay Corporation Tax?
The deadline to pay your Corporation Tax bill is usually 9 months and one day after the end of the accounting period. The deadline for your tax return is 12 months after the end of the accounting period it covers.
If you need help relating to your Corporation Tax, book a call with us.