What is Corporation Tax?
Corporation Tax (CT), a necessary boon or bane for every crowned corporate in the UK, is a tax imposed on the total profits of a company. This includes everything from trading profits to investment gains and other relevant taxable income accrued within an accounting period.
Rate Rendezvous
In the romantic dance of taxation, the size of your company’s profits dictates which tune you’ll tap to. For the fiscal foxtrot:
- Small Comfort: Companies cuddling up with profits of £300,000 or less enjoy a snug rate of 20%. It’s like the tax version of a small café - cozy and less costly.
- Full Swing: Those swinging at the heavy profits over £1.5 million, pirouette at 21%. It’s the grand ballroom where the big bands play.
- In Between the Beats: For those twirling their profits between £300,000 and £1.5 million, marginal relief offers a tax rhythm that eases you from the small stage to the big league.
Timing to the Tune
Large companies, meanwhile, pay CT in precisely choreographed instalments. Other companies, perhaps less theatric, settle their scores nine months after the curtain falls on their chargeable accounting period.
Deductions: The Choreographed Steps
A few fancy footworks can reduce your CT, like:
- Capital Allowances: Deductibles for certain investments in business assets, allowing you to keep a bit more tempo in your budget.
- Carried Forward Losses: If you’ve had a rough routine in previous years, these losses can be carried forward to reduce current taxable profits, softening the financial fall.
Capital Gains: The Encore
Not to forget, any chargeable gains from the grand exit of fixed assets are elegantly included in the total profits for CT purposes.
Further Information
Crave more details? Waltz over to the Gov.uk guide on corporation tax (here) for a thorough breakdown and updates.
Related Terms
- Accounting Period: The financial year for the company where earnings and expenses are recorded.
- Marginal Relief: A reduction in CT, easing companies from lower to higher tax rates.
- Capital Allowances: Deductions businesses can claim from their taxable profit, concerning assets or investments.
Recommended Books for Further Reading
- “Corporate Tax Planning” – Dive deeper into strategies to legally minimize CT.
- “The Entrepreneur’s Guide to UK Tax” – Navigate UK taxes with ease and confidence.
Toast to your corporate health: may your profits be high, and your taxes, well, as bearable as a Monday morning!
