CORPORATION TAX BASICS EXPLAINED FOR SMALL BUSINESS (UK)
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- Опубліковано 9 лип 2024
- Are you wondering how company tax works? Heard of ‘Corporation Tax’ but don’t know what it is? In this video, Dan runs you through all the must know info.
Topics include:
What is corporation tax
How much corporation tax you need to pay
How to reduce corporation tax
When is corporation tax due
How you pay corporation tax
Limited company tax
Corporation tax basics
Corporation tax explained
… and more!
HMRC payment link: www.gov.uk/pay-corporation-tax
If you have any questions on this, please comment below.
You can see more about what we get up to on the following:
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Podcast: heelanhub.co.uk The HeelanHub Podcast, a show for small business owners.
Join our mailing list for tax tips at: www.heelanassociates.co.uk
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Web: www.heelanassociates.co.uk
Call: 02392 240040 Email: info@heelanassociates.co.uk
#accounting #businessaccounting #limitedcompany #companytax #tax
I love this channel! Thank you for all the wonderful content
Glad you enjoy it!
Great video! Thanks!!
Glad you found it useful!
Hi Dan, great videos, thanks for all you do.
Wanted to ask you a question. Is it possible to do corporation tax return for a small (tiny) business without an accountant or the special software they use?
It is, but we’ve never come across someone that’s done it, mainly because you need to prepare compliant accounts with the return (unlike a normal individual tax return). Can be done though:
www.gov.uk/file-your-company-accounts-and-tax-return
Love your videos. At what amount in sales do you have to pay tax?
It’s two things really. Sales is relevant to when to have to be VAT registered (‘sales tax - £85,000), other is PROFITS which is where the corporation tax is paid and that’s paid for £1.
This may help as well LIMITED COMPANY TAX FREE THRESHOLD - IS THIS REAL?
ua-cam.com/video/Y3YhzOaE_0I/v-deo.html
Amazing informative video!
Glad you enjoyed!
HI Dan! My accounting year end from 19July19-31July20, does that mean i need to file two returns one for the year and one for 12 days?
Sounds correct, Corp tax period is max 1 year so often occurs in year one.
Hi Dan! Any advice on what to do when I have no corporation tax to pay? Do I send the payslip back with 'NIL DUE' or is there an easier way to do it?
It depends why you have none to pay.
If you haven't traded, speak to HMRC and they may say 'don't worry about sending us a return'.
If it's because you made a loss, you will need to file a corporation tax return, but it will be good to 'log the loss' anyway.
What happens if you set up against the company but your company doesn’t matter to me money for me to be legal I have to limited company to be legal
Hi Daryl, not sure we understand - can you explain more?
Thanks for the video. Do you know if on a Rent to Rent Serviced Accommodation business within a limited company the rent paid is that a deductible allowable expense? For example if you pay £1k rent to the landlord, £0.3k utilities but rented the rooms out individually and received £2k income. Would you just pay corporation tax on the profit after these expenses? Thanks
It's effectively usual business accounting principals, so you are only paying tax on the profit you make.
@@HeelanAssociates Further to the R2R SA question, with regards to paying deposits for rentals.. I paid a 2k deposit in one tax year, then this deposit got refunded the following tax year. Does this get seen as profit?
great video. Sir Is corporate tax cuts is on the basis of company revenue or company profit in 2021 in the UK?
Corporation Tax rate applies to profits.
Hello,
If a company has been accumulated negative results does that impact the calculation of the corporation tax? Or should we just consider in the calculation the yearly P&L?
If you have a trading loss you can usually offset that against future years profits, so can impact. In some circumstances you can carry back as well!
I need to keep asking my accountant about what is happening. Do not assuming that your accountant is looking after you. Keep a journal about when you have paid HMRC. M.
It's always good practice to keep a solid handle on these things. It's one of the weird things with the accounting profession in that the legal responsibly for tax and reporting always lies with the tax payer regardless...
... so always good to keep yourself in the loop.
Great plan simple advice
Glad you enjoyed!
Thank you so much
Glad you enjoyed!
So for clarity a construction company that has CIS tax taxed at source by the client will still have to pay 19%?
Yes but you offset that against the cis deductions. In theory if all your work was deducted at 20% and your tax bill was a 19% you’d receive a repayment.
Hi can I ask for a small part time car trader who deals from home for the tax would it be from the profits or the turnover because they are very differant in profits it would be around £8000 a year and turn over would be around £75,000
Corp tax is on profits.
So after I register an LLC I simply keep track of income and expenses then calculate profits and have to pay 19% of those profits? Where do I keep track of the expenses and income?
This may help regarding keeping track ua-cam.com/video/t7BEssegR98/v-deo.html . The tax bill will be 19% of the ‘taxable’ profits - that’s the tricky bit, working that out. You will also likely have taxes on the money you draw out of the company.
I've just registered for Corporation tax, in the setup I said I'd file my accounts on the 31st January 2022, was that the best option? Cheers.
What does Companies House say your year end is?
Am i correct in thinking that by reducing your corporation tax via expenses etc would also reduce the profit that you can take dividends from? As a small start up side business it would be solely dividends to pay us but are we not also reducing the ‘pot’ that we can take from? Any help appreciated
Hi Mark that’s correct, reducing profit generally equals reduced availability for dividends.
In a super simple example makes sense as you’ve depleted the cash on expenses that are ‘used up’, so wouldn’t have cash for dividend.
If I just incorporated a Ltd company, do I start filing corporation tax only when I make profits? I.e. if the company is live and running but no money is being made yet. As in no customers. Is there a certain profit threshold that you only start paying corporation tax when I get there
No profit = no tax but if your trading you will need a return once a year.
It’s normally filed *upto* 12 months after company year end, although tax is payable around 9m mark.
When it comes to interest payable for loans from trust.
Can those interest be set off against corporate tax?
Possibly that one is hard to answer here I’m afraid, too many unknowns. Sorry that’s not super helpful!
I own a small business, we are all self employed, we do our individual taxes but then I got a letter about corporation tax? I don’t get it? What do I submit to pay corporation tax if I’ve already done my tax?
You should only get a corporation tax return if you are a limited company (or charity sometimes). It should be addressed to the company in question.
Hi, wanna ask if someone here knows training or webinar where I can have certifications for UK financials and taxes?
In what sort of sense? Do you mean certified to do tax / accounts work for others?
@@HeelanAssociates Yes.
I got LTD company but have not used it at all no transaction, no profit and loss during the period. Do I still have to submit the corporate tax and does it be zero tax to pay. Thanks in advance
Check this out WHAT TO FILE FOR MY LIMITED COMPANY (THAT’S ‘DONE NOTHING’)
ua-cam.com/video/22qJfN5Pnik/v-deo.html
Hey ,
I had a limited company for a year and 2 months , I’ve got a business bank account and want to close my business down and give HMRC tax returns etc , please help me out I’m very confused do I get all my business bank account transactions together and send it to them?
This one may help but you will need to prepare accounts, file with hmrc and companies house and do some admin to close LTD COMPANY THAT'S BARELY TRADED? YOU STILL NEED TO DO THIS
ua-cam.com/video/HTqHPHHHHdc/v-deo.html
Hi Dan,
Once my company gets taxed, do I also get taxed as an individual once I pay myself?
I am looking to pay myself as the Director every month
Yes that’s right so to get the most tax efficient thing you need to consider the options of how best to structure. Have a watch of our videos are ‘best’ pay and paying salaries to expand.
great video
Glad you enjoyed!
great video thx. My questions is that do you easily pay 'yourself' as a director through a simply bank tranfer from my business bank account? Can we do that weekly or monthly and should we pay something immeditately after the money is transferred like a NIC payment? Thankss :)
Have you seen this one? ua-cam.com/video/mP2DdqpqTLE/v-deo.html
Berkay Online HMRC'de vergi için mikro hesap dosyalarını göndermemiz yeterli mi vergilendirilmek için ? Bilanço hesabını ön muhasebe tutarak yıl sonunda keep account siteleri ile oluşturuyoruz. Beni endişelendiren durum bu işlemlerin dışında yapmamız gereken bir adım var mı ?
Hi mate great content, how come I owe corporation tax when I'm cis registered and I'm taxed at source ?
Because they interact differently in a limited company, and quite often you have a different date to pay corp tax vs claiming a repayment of CIS.
As a self employed individual the deadlines all line up and tax is offset, in a LTD doesn't work as straightforward. You have to really be on top of getting the CIS repayment when you get to the other side of 5th April each year, so that any repayment cash is ready for you to pay your corp tax.
There are ways to have HMRC offset it, but it can get messy.
if i have a ltd companies but never have profit because never start any website or online shop what i need to do
Have you used them at all? Have a look here: ua-cam.com/video/b2QOl7250ns/v-deo.html
ua-cam.com/video/-zZWtswfaSU/v-deo.html
If I am a non-UK national operating a UK LTD, do I have to pay personal income tax apart from corporation tax?
That ones difficult to answer because it depends on your tax residency, and what sort of incomes sources you have. The answer is ‘maybe’ 😃
Sorry that’s not more help but it’s actually one of the more complex areas of tax, not something we could answer here.
Thanks for informative videos
Please advise can a UK limited company receive remittance say as a gift from parents in India in inr to gbp via online wired transfer and what are its tax implications compared to receiving money as a gift to a individual in UK ?
Ideally this money will then be used for 1st property purchase in the UK
If you can make a video will be brilliant and useful to hopefully few people 😊🙏
Many thanks
Probably a little hard to cover this in a comment this one, but in it sounds like what you could be doing is just loaning money to the company, which wouldn't have any tax implications (usually) for the company.
Hi Dan, I just got offered recruitment work from a US employer and I was advised to open a UK ltd to receive payment. Is this accurate to simply receive payslips for services? I am wondering if an Ltd would result in the least amount of tax paid.
I appreciate you taking time to answer, thank you.
Hi Nathan,
Biggest issue here is the world 'employment' / 'employer'. If they are employing you, you basically can't do a LTD, it's an employment contract and they have obligations here in UK / you have rights.
If you are providing freelancer recruitment services, then LTD is on the table.
Hope that helps :- )
If you needed a more detailed run through of the queries, please get in touch with our team - we have a 1-2-1 service that can get you the clarity you need on this.
I registered a limited company in mid of 2019, so far the total revenue from the start would be around 20k pounds, but I didn't make any profits, I am in total loss. I still haven't filed a tax. Can you please let me know what I need to do now. thanks
Hi, sounds like you need some accountancy help. Bit too wide to cover in a comment. You can always contact our team who can run you through the costs and services options to help you.
I have a registered Ltd but I haven’t engaged in any trading activity yet, and don’t plan to until next year. Would I still have to submit my accounts (which would be blank) ?
Dormant accounts are likely needed, have a watch of these:
ua-cam.com/video/SFJBvG8OPsg/v-deo.html
ua-cam.com/video/b2QOl7250ns/v-deo.html
If i make uk limited company in virtually then what will be charges of income tax?
How do you mean virtually?
Thanks! Can I ask what annual/quarterly/monthly fees an LLC that is not making a profit has to pay in the UK?
For Tax? If no profit = no tax in terms of the corporation tax.
@@HeelanAssociates Thank you very much!
Great informative video. May i ask if am able to see myhow much Corporation tax i owe, or only an accountant has access to this? Thanks.
Do you mean as the year goes on or once your submitted your company tax return?
Hi i provide RPO in Uk...i do provide freelance Recruitment Process Outsourcing ...and my company is not registered in UK...but if i register my company in UK ...what is your opinion about tax .... I get normelly 3000 pounds for a month like 36000 round about for a year....is the tax aplicable on this......??
I am not UK citizen
Can be a little problematic. Probably too many things to list here in a comment but you’d have various issues with potentially two countries wanting tax from you.
After you paid corporation tax, if you want take out the money from bank, do you pay any tax again?
Only it terms of personal tax. So if it were dividend or salary for example, you may pay personal tax when you take it out. But not more corp tax.
Hello sir, I have opened a limited company but it is not operate yet.
But I don't understand how to pay business taxes, how to use accounting to pay business tax... the purpose of the business is to rent houses, but I don't know how to inform HMRC to include the houses to run business and how to do work with accounting etc I'm completely out of this knowledge could you help me or would you advise a book so that it can help me please thank you
On this one it sounds like you need to seek professional advice and or gain some support from an accountant. Particularly in regards to renting via a limited company. Sadly there isn’t a book that will help here.
Would you do a video on expenses, I work full time and just about to set up a side hassle as a dj and want to know what i can claim (petrol, download music, software subscription, and how much of my personal mobile phone, as can i claim any money back from using my spare room as the office when i am sorting out paper work. A video would be amazing please
Will add to our list!
@@HeelanAssociates thank you
Great Video - ! - thanks - is it possible to run two UK businesses and collect two sets of incomes / dividends ? how would the tax work ?
Yes totally.
So each company has its own bill.
For the dividend income you receive, it all goes into one ‘pot’ effectively on your personal tax return, and any tax bill paid there.
Thank you for coming back to me that’s great information - I really appreciate your explanation thank you again again -
hi i have e commerce company selling online market places which software do you offer ?,also do i need an good accountant ,these sofware companies ofefr accounttant as well but i do not know about thier customer service ,i am not sure how they are trustable about theirr advice
There are many great accountancy companies out there that specialise in ecommerce.
Many of them are very competitive price wise as well.
The usual difference is on the advice and overall support, so it's a balance. From clients we come across who have used the cheaper online ones before us, they normally feel less supported/less of a relationship/service, but did appreciate the lower cost, so it depends on your needs really.
Software wise, we are actually putting a video together on this, but Xero/Quickbooks and then an add on, such as greenback or A2X are all good many of these types of business.
If I have a trading business and just made a limited company for tax purposes, couldn’t I just use the company’s bank account for all my expenditure( including personal) as it is just a one man business so all the income I get, I keep 81% of it
Yes and no. It's physically possible, but it's not best practice. There are a few technical issues with this surrounding your 'directors loan account'. If you image all personal expenditure will end up in your 'loan' account, as it's not salary or dividend at that point you spend it.
You then need to have the right paperwork in place to formally declare dividend or salary to clear this 'loan'.
Its very easy to end up in a situation where this timing is off, which leads to an argument where HMRC will say your loan account was a) high enough where you should get a taxable benefit in kind on it and/or b) they could argue as you are settling your own personal liabilities (known as a 'Pecuniary Liability') and end up with a National Insurance bill.
As a third point.... its a pain for book-keepers :- )
I’ve just started my consulting business - currently I’m making £500 per month.
When do you think I should worry about tax? Isn’t there an annually threshold before you have to pay tax?
Think we are going to do a video with this one :- ) Very common Q. The short answer is though, no there is threshold for a limited company. Any profit is generally taxable.
We would recommend engaging an accountant early to make sure the set up is right, book-keeping/records all ok and you are structuring any pay in the 'best' way.
If our UK limited company is registered but we reside outside of the UK, can we also deduct business expenses, such as internet and electricity bills, in order to minimize our Corporation Tax liability as a strategy to reduce taxes?
Sorry this one we can't really answer in a comment, there are too many nuances to the situation.
Hi, I've got a question
For example, If a company makes £20,000 a year with £5000 worth of expenses,
And I have lets say ~100 invoices a month generated to customers by WHMCS, and I save them all + invoices of the expenses.
Can I fill taxes and do all that by myself? Do I need a book-keeping service or an accountant?
Thanks for the video.
You never *need* an accountant as a small business, but many owners find filing a limited company *accounts* + corp tax return a challenge. As a result most owners of a limited company have one.
I incorporated my Company 10 days ago it's still dormant and I don't Know when I start make trading, must I comunicate to HMRC who my company Is dormant?
You could wait until closer to the company year end in reality, give yourself time to start. You could contact and say dormant, you’d just have to contact as soon as you aren’t.
A question I cannot seem to find the answer to:
A limited company buys £100k of stock (say TOYs) and sells it for £200k means the company made £100k profit. IF this company buys £200k of stock just before tax year end will it then mean this company made £0 profit resulting in the company having a £0 corporation tax bill as it was reinvested? Effectively deferring the profits until the next year unless they do it again year on year.
If the answer is no to the above Does this model differ if say it was a property business? So a property dev business buys a house for £100k sells for £200k and then buys more property with all the profits within the same tax year to get a £0 Corporation Tax bill for that year only? Does it work like that?
We have these 'matching' rules in accounting, called the accruals concept. It's designed to stop this.
I explain this in action with stock here: ua-cam.com/video/meiBmOjQh0k/v-deo.html
The more you spend the more government taxes you... Socialist dumb in UK
I haven’t work permit but UK visit visa. Can I register a business and run there?
Sorry we can't comment on visa issues, it's not our area of expertise.
Mr. Heelan .
Thank you for your great explication’s.
Can I ask you please for a private paid training please?
Thank you 🙏
Glad you enjoyed! From a training point of view, our business does book-keeping training, but aside from that we don't provide accounting training (we provide those services ourselves as a core service). If it's book-keeping training you are interesting in, get in touch with the team on info@heelanassociates.co.uk.
Hello any videos on CIC ???
Hi, currently no plans to sadly. Where we are business accountants, CICs aren’t an area we add a lot of value to, so honestly don’t really enjoy making content on them. They are best left to someone passionate about them!
I've been trading for less than a year but have no where near made a profit yet. I've received an 'Urgent- your companies status for Corporation Tax' letter from HMRC. Do I still have to pay corporation tax? If no, how do I inform them? Thank so much for your video by the way! x
If you’ve made no profit, no tax. But you will still have to do a tax return if you’ve traded. You will want to log any loss, as you maybe able to offset against future profits.
Hi,
I have a Ltd company that is purely just to pay me as a director, I would say 90% to 95% of money paid in to the business is paid to me and I pay personal tax on that. So effectively no profits. Does that mean I would have a very small if any corporation tax bill?
If depends how you pay yourself. If you declare this via payroll to HMRC it would wipe out most of your profits, but might not be the best way to do it for tax.
Try this one WHY YOU NEED TO PAY YOURSELF SALARY (UK LTD COMPANY)
ua-cam.com/video/TkMkqUweZo8/v-deo.html
Very informative sir. When and how can I get an appointment with you. I'm in Birmingham
Hi there if you contact the team via our website they can see how we might assist you.
what if I'm the only shareholder of my company ? How much salary and/or dividents can I pay to myself? You said that if I want to take more money out of my company I have to pay more taxes? Could you explain?
The company pays it's own tax bill (corporation tax). When you take money out, you pay personal tax depending on the amounts. The amount you *could* take out depends on many factors that would be too hard to answer here.
HOW you would take it is the other question, have a watch of this one: ua-cam.com/video/mP2DdqpqTLE/v-deo.html
I made a £34K profit before corporation tax in 2020. Can I set that against a loss of £56K I made the year before 2019 Nick
Would depend on a few factors but presuming it was incurred in the same trade very likely yes
i have formed UK LTD in june 2021, and still i did not do any business, What are my taxes?
It’s hard to say without lots of further questions, but from the company corporation tax view point, you only pay tax on profit. So no profit = no tax.
hello im just wondering if I have limited company and I make money in crypto and invest the profits back into crypto or stocks or other businesses can I write that off as on my corporation tax. thanks.
Who owns the crypto and stocks?
My limited company will own the stock and crypto
@@mqaum1844 Ok so its similar rules, if you make a profit on the trades it's likely there is corp tax to pay (there is no separate gains allowance in a company).
If you've earnt money in a trading business and invested it in crypto, this won't reduce your profits (unless you start making losses ofc), so therefore won't impact your tax bill.
Hi Dan, thanks for the info & efforts, do you offer consultation or accounting service for start up business?
Hi Yes we do, if you drop us a message here the team can get in touch www.heelanassociates.co.uk/contact-us/
I’m a US resident and US taxpayer. If I set a UK Ltd company and do business abroad but not in UK, do I have to pay corporate taxes in UK?
It depends on a few factors, a key one being where you make decisions and control the company.
If you are entirely US based I’d probably wonder why you need a UK company. It gets complicated because technically you might not need to pay UK tax (likely US company tax) but the UK authorities by default will look to tax you.
Getting the right set up with tax office is can be a pain to sort in this situation.
@@HeelanAssociates the idea is to set up an offshore company and bank account for international clients (except UK clients and Latin America) and keep the US based company for US and Latin American clients. All the decisions and work will be done in US.
Is the corporation tax the same as business tax return?
Or buissnes tax return is the form CT 600, which actually calculate the corporation tax? Thanks
Yes basically all the same thing. ‘Corp tax return = ct600
Good afternoon, was wondering if you could please help me out, if my limited company had a total profit of £50,000 how much tax would I pay? I was looking at dividends but then obviously you still have to pay corporation tax? Or am I wrong. I am located in Scotland and I am a estate agent for Remax through commission base, and I have heard that it would be more tax efficient to pay myself through a limited company?
It’s a difficult one to answer in a comment as there are many factors, but yes usually you pay Corp and dividend tax, but done correctly your take home will be more than if you did under normally salary or self employment.
Have you seen this one? DIVIDEND VS SALARY EXPLAINED! (UK)
ua-cam.com/video/BZCAuYdOluQ/v-deo.html
We only have 29% profit this mean 29-19 = 11% profit and after VAT we have 3% profit
Hi Taimoor, could you explain your question further?
@@HeelanAssociates there high exise taxes in UK aswell & property tax
What is the rule for Non Resident LTD Company? As far as I know if there is no 'permanent establishment' in the UK i.e. the UK company can also be deemed to be non-UK tax resident and pay tax on UK-sourced income only.
ua-cam.com/video/TQBS7m3VTlg/v-deo.html
I sell books from Amazon US. Like this video many experts are saying any sales generated from Amazon us or Canada will not be under UK corporate tax ? Only the sales from UK Amazon will be subject to corporate tax as I will not use any establishment or factory. What do you think?
I am from Bangladesh. Someone told me, Per Article 7 of the Double Taxation Treaty with the UK, Bangladesh has the option to tax the UK company if you manage and control the business from there with no base of operations in the UK. If this applies, no tax will be payable in the UK but in Bangladesh instead.
Little too complicated to explain in a comment i'm afraid.
But in short, you tend to have a challenge with this that if you have a UK reg'd company default position is HMRC will want tax. They will often ask you to prove where you are paying the tax/registered elsewhere to exempt you from paying here.
@@HeelanAssociates as I am from Bangladesh and there is a tax treaty between UK and Bangladesh so will that be helpful? I guess I will need to pay 0 tax here in UK. Right? Here is what someone told me: "Per Article 7 of the Double Taxation Treaty with the UK, Bangladesh has the option to tax the UK company if you manage and control the business from there with no base of operations in the UK. If this applies, no tax will be payable in the UK but in Bangladesh instead."
He also told me :""if there is no 'permanent establishment' in the UK i.e. the UK company can also be deemed to be non-UK tax resident and pay tax on UK-sourced income only "
Over taxed in UK
Our corp tax rate is one of the lowest out there, but yes no owner likes being taxed :- )
@@HeelanAssociates add vat tax & exise taxes in UK dummy
Somone pressed you
Thank you.
zero info.. except it is 19%.. wow..
Did you have a specific question you’d like answered?
goes too fast tbh. not easy to follow and understand
We have written versions of almost all videos at heelanassociates.co.uk/blog
Why so fast talking what is your problem
Is there a question you needed to know that you couldn’t understand? We write most of what we record into a blog we could share.