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As an SME business, a big annual task is paying corporation tax. It can be a complex business, with several factors to take into account when submitting your corporate tax returns. At Mollan & Co, we have over 40 years of experience as a small business accountant, so have used this knowledge to compile this simple step-by-step guide to make the process of submitting corporation tax as an SME as easy as possible.
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Corporation tax is the taxation system HMRC uses to tax businesses on their annual income. The government uses the intake to fund schools, hospitals, roads, public safety programs, and other infrastructural projects, including healthcare.
Corporation tax provides makes many fundamentals possible in the UK:
As an SME company, your corporation tax payment process will follow a fairly strict process:
You pay your corporation tax through your business tax account on HMRC. To do this:
For credit cards, HMRC will charge a non-refundable fee; for debit cards, they don’t. For more information, look at the official HMRC Gov video.
If you run a UK-based company, you must register with HMRC to pay corporation tax. This is a separate process from registering your company with Companies House.
You must register to pay corporation tax within three months of starting your business activities (e.g., buying, selling, advertising, employing staff).
For new companies, this is the registration process:
If you don’t have a Government Gateway account, you will need to create one in order to access HMRC’s online services. Once you complete registration, HMRC will confirm it and you will be able to pay corporation tax through their online system.
Profit band | Tax rate | Notes |
Under £50,000 | 19% | Small profits rate |
Over £250,000 | 25% | 25% tax rate |
Between £50,000 and £250,000 | 26.50% | Effective rate of 26.5% |
If your company earns between £50,000 and £250,000, you will pay some of the profits at the 19% rate, and others at the 25% rate, resulting in a total effective tax rate of 26.5%.
If your company is eligible for marginal relief (UK resident companies only), then each £1 of profit is taxed at an effective rate of 26.5%.
There are different parameters for large enterprise companies:
The following businesses may have to pay corporation tax:
There are a few reasons why a small business could be exempt from corporate tax, such as if your company:
But if your company is actively trading and making profits, it must pay corporation tax.
This includes most SMEs, even with tax reliefs and allowances applied. It is very rare that a company would be able to avoid tax payments altogether.
You can lower your corporation tax by including all annual business expenses and all relevant deductions. This can be a big undertaking, which is made much easier if you consult an accountant.
Knowing your tax obligations and planning accordingly is vital for staying compliant with regulations and making business run smoothly. But with an infrastructure in place that uses modern methods such as Cloud Accounting, and the support of experienced accountants such as us at Mollan & Co, you can streamline tax processes, guarantee accuracy, and grow as a business.
Streamlining processes such as taxes can free you up to focus on business growth and sustainability.
Get in touch today to book your free, no-obligation consultation
I'm the owner and Managing Director of Mollan & Co Accountants. I'm a skilled and efficient accountant with more than 20 years of experience in the industry.
I developed valuable skills in commercialisation through my work in the science and technology department at the Scottish University. Then, in 2002, I formed my own internet-based marketing company, producing and distributing 360° virtual reality tours for the Scottish tourism sector.
I now use my commercial skills, expert tax knowledge and first-hand experience to help other businesses grow and flourish through strong accounting practice.
Our success at Mollan & Co is directly related to the success of our clients.