Corporation Tax in the UK

Find out about the taxes which are applicable to businesses in the UK, including corporation tax and payroll taxes...

Corporation Tax

There is only one major tax on large companies’ profits, which is currently levied rate of 23% from 1 April 2013. By 2015 the UK rate of corporation tax will reduce to 20%. No change has been announced in March 2013 UK Budget for small companies corporation tax rate, which is currently levied at a rate of 20%. Rates are fixed in advance and announced in the Budget each year.

Companies have to ‘self assess’ in a similar way to individuals. The times at which corporation tax is payable depend on the size of the company/group paying the tax.

For companies whose annual profits are less than £1.5m, or whose annual tax liability is less than £10,000, tax must be paid within nine months of the end of an accounting period. These thresholds are based on a 12-month accounting period and the limits are pro-rated for accounting periods of less than 12 months. If the final amount due has not been determined, an estimated amount must be paid.

For companies whose taxable profits are estimated to be £1.5m or more in a 12-month period, and whose annual corporation tax liability exceeds £10,000, corporation tax must be paid on account by quarterly instalments, beginning six months and 13 days from the start of the accounting period.

The above thresholds are adjusted for the number of active associated companies within the worldwide group and for accounting periods of less than 12 months.

Where deadlines are not met, interest is automatically charged and financial penalties may be imposed.

Payroll Taxes

All UK employers must operate a Pay As You Earn (PAYE) system. Under PAYE, employers must deduct income tax and social security contributions from employee pay, provide them with a written pay statement, make payments to HM Revenue and Customs on a monthly or quarterly basis and keep adequate records.

From April 2013, HM Revenue and Customs will start to introduce Real Time Information (RTI) for all employers. Under RTI, employers will have to tell HM Revenue and Customs about payments to employees before or when they make those payments, on line. This information may be shared with other Government departments such as The Department for Work and Pensions and the UK Borders Agency. It is the employer’s responsibility to ensure that the information is accurate and up to date. HM Revenue and Customs has said that it plans to introduce penalties for late or inaccurate submissions from April 2014.

Information supplied by PriceWaterhouseCoopers PWC, 1 Embankment Place, London, WC2N 6RH Contact: Mike Curran | Tel: 0207 213 8190 | email or Dipan Shah | Tel: 0207 804 0685 | email