A UK company pays several taxes, on different bases, to different deadlines. The complexity is not in any single one. It is in keeping all of them straight at the same time.
Corporation Tax
Corporation Tax is charged on a company's taxable profits, which are trading profits plus most other income and chargeable gains, less allowable deductions.
For financial years beginning on or after 1 April 2023 the main rate is 25 per cent where profits exceed 250,000 pounds, and a small profits rate of 19 per cent applies where profits are 50,000 pounds or less. Between those thresholds, marginal relief produces an effective rate that rises gradually. Companies with associated companies divide the thresholds between them.
A company must register for Corporation Tax within three months of beginning to trade and pay its liability nine months and one day after the end of its accounting period. The return is usually due twelve months after the period end, and larger companies pay in quarterly instalments.
VAT
VAT is charged on most goods and services supplied by a VAT registered business. Registration is compulsory once taxable turnover exceeds the threshold, currently 90,000 pounds over any rolling twelve months, and voluntary registration is available below it.
Registered businesses charge VAT on their sales, reclaim it on most purchases, and file returns, usually quarterly, under Making Tax Digital, which requires digital record keeping and compatible software.
Two schemes matter for smaller businesses. The flat rate scheme applies a single percentage to turnover in exchange for limited input tax recovery. The cash accounting scheme aligns VAT payments with the point at which customers actually pay.
Payroll taxes
Where a company employs people, it operates PAYE. Income tax and employee National Insurance are deducted from pay and paid over to HMRC, and employer National Insurance is paid on top. Payroll must be reported in real time on or before each payday.
Benefits in kind, such as company cars or private medical insurance, are reported separately and may attract their own tax charge.
Business rates
Business rates are charged on non domestic property and collected by the local authority. The amount depends on the rateable value of the property and a multiplier set nationally, with reliefs available for small businesses, retail, hospitality and premises in enterprise zones.
Companies working from home, or from serviced offices, will usually have rates included in their rent rather than billed directly.
Dividends and owner pay
A director who owns shares is usually paid a combination of salary and dividends. Dividends are paid out of post tax profits and are taxed in the shareholder's hands at dividend rates, which are lower than the equivalent income tax rates but are not free.
The split between salary and dividends should be reviewed each year, because the thresholds and rates change and because the most tax efficient structure depends on the level of profit and any other income the director has.
Reliefs worth knowing
Several reliefs materially change a company's tax position. The annual investment allowance and full expensing allow substantial plant and machinery purchases to be deducted in the year of purchase. Research and development relief supports qualifying technical work. The Patent Box reduces the rate on profits from patented inventions. Loss relief allows trading losses to be carried forward and, in some cases, back.
The case for getting help
None of this is beyond a competent founder. All of it is easy to get wrong in ways that only become visible at year end, when the options for fixing them have narrowed. The reasonable position for most growing companies is to own the commercial decisions and to pay someone else to own the deadlines.
