If you run a limited company, you’ll need to file and pay your corporation tax return each year. To meet your obligations to HMRC, you’ll need to have various pieces of information on hand to pay your return, and decide on a payment method that works for you.
Here’s everything you need to know about paying your corporation tax bill.
How much to pay
As of 1 April 2023, the rate of corporation tax you’ll need to pay will depend on your taxable profits in your accounting year. If you made less than £50,000 in profit, you’ll pay a flat 19% rate on those profits, while companies making over £250,000 will face a higher rate of 25%.
For profits in between those two thresholds, marginal relief will apply, tapering the rate of corporation tax that applies.
Sometimes, there will be no tax due. If that happens, you’ll still need to complete a corporation tax return, as well as submit a no corporation tax payment due form.
When to pay
Most limited companies will pay corporation tax once a year, but there are different rules and deadlines for businesses with more than £1.5 million in annual profits. Those businesses will need to pay in instalments.
If your business makes less than £1.5 million annually, you’ll have up to nine months and one day after the end of your accounting period to pay any corporation tax due.
Your accounting period is usually the financial year of your business. However, startups can sometimes have two periods in their first year of operation.
How to pay corporation tax
Once you know when your deadline is, you’ll need to submit and pay your corporation tax return. There are various payment methods available, including via direct debit, online banking or at your bank.
If your company is part of a group, you may be able to pay your corporation tax bill under a group pay arrangement.
How you choose to pay will affect how much time you need to allow for the payment to go through. If your deadline lands on a weekend or bank holiday, you may need to pay early to make sure your payment reaches HMRC in time.
Regardless of your chosen payment method, you’ll need to provide your 17-digit corporation tax reference number for the accounting period you’re paying for.
You’ll find your reference number on either your “notice to deliver tax return” letter, on reminders from HMRC, or in your company’s HMRC online account.
This will change every accounting period, so you’ll need to make sure you’re using the correct one each time. Using the wrong number may delay your payment.
Direct debit
You can pay corporation tax through your company’s HMRC online account.
The first time you set a direct debit up from HMRC, you should allow five working days for it to process. After that’s been authorised, your direct debits should only take around three days to go through.
Online and telephone banking
Limited companies can also make payments via online or telephone bank transfer. Your “notice to deliver your tax return” will tell you which bank account to pay into.
Payments made this way will usually reach HMRC on the same working day.
Another option is paying via debit or corporate credit card. However, there will be a fee if you pay with a corporate card, and you’ll need to use a different method if you’re unable to pay your bill in full.
At your bank or building society
You’ll need a paying in slip from HMRC if you want to pay your corporation tax bill at your bank or building society.
When paying via cheque, you’ll need to make it payable to “HM Revenue and Customs only” and write your corporation tax payment reference number on the back.
It will take around three working days for this method of payment to reach HMRC’s bank account.
Meeting your obligations
It’s important to pay your corporation tax bill accurately and on time. Missing the deadline could result in penalties, and HMRC may pay you interest if you pay your corporation tax bill early.
However, running an incorporated business comes with a lot of responsibilities that can be difficult to stay on top of. Our corporation tax return services can take on much of that administrative burden.
On top of calculating and paying your tax bill for you, we can also offer expert advice on tax planning and help you make the most of the available reliefs and allowances.
Get in touch with us today to find out how we can take the stress out of your company’s tax returns.