How much tax does a limited company pay?
Limited Company Tax in the UK
As a limited company owner in the UK, it's important to know how much tax you'll need to pay. Depending on the size of your company and your profits, you'll be liable for different taxes. In this blog post, we'll give you an overview of the different taxes that apply to limited companies in the UK so that you can be prepared come tax time.
Corporation Tax
If your limited company is based in the UK, you'll need to pay Corporation Tax on your profits. The current rate of Corporation Tax is 19%. Corporation Tax is paid on your company's taxable profits, which are calculated after deducting allowable expenses. You'll need to file a Company Tax Return each year and pay any Corporation Tax due within 9 months and 1 day of your company's financial year end.
Value Added Tax (VAT)
Value Added Tax (or VAT) is a tax that is charged on most goods and services that are sold in the UK. If your limited company is registered for VAT, you'll need to charge VAT on any goods or services that you sell at the current rate of 20%. You'll then need to pay this over to HMRC periodically - usually every quarter. It's important to note that as a limited company owner, you can't reclaim any VAT that you've paid on purchases for your business. However, you can reclaim VAT paid on capital items such as machinery or office furniture.
Income Tax
If you're a director or shareholder of a limited company, you'll need to pay Income Tax on any salary or dividends that you receive from the company. The amount of Income Tax that you pay will depend on how much money you earn and your personal circumstances.
PAYE and National Insurance
If your limited company employs staff, you'll need to operate PAYE (Pay As You Earn) and deduct National Insurance contributions from their salaries before paying them their wages. As an employer, you'll also need to make National Insurance contributions towards your employees' salaries. These contributions go towards funding state benefits such as the NHS and state pensions.
As a limited company owner in the UK, it's important to be aware of the different taxes that you may need to pay. Depending on the size and profitability of your company, you may be liable for Corporation Tax, Value Added Tax (VAT), Income Tax, PAYE and National Insurance contributions. By understanding which taxes apply to your business, you can ensure that you're prepared come tax time.
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