Corporation Tax – Are You Paying More Than You Need To?
Published Date: 3th December 2019
Make Sure You’re Not Paying More Corporation Tax Than You Need To!
Corporation Tax is a bit like Income Tax for companies, but the difference is that companies don’t have a personal allowance. This means that as soon as your business starts making a profit, it needs to start paying Corporation Tax at the Corporation Tax rate (unless it’s previously made losses).
The Corporation Tax rate for company profits for the 2018/19 tax year is 19% so a business with an annual profit of £10,000 will pay £1,900 in Corporation Tax. Reducing the amount of tax you pay is a tricky concept. Most responsible individuals and businesses want to pay the correct amount of tax that they owe – but equally, don’t want to pay more than they need to.
Having said that there are also disallowable expenses you should be aware of that are not incurred ‘wholly and exclusively’ for business and trade purposes and cannot therefore not be claimed for. These include:
– council tax for your house if you work from home full or part-time;
– clothes that are not part of your uniform;
– donations to charity, contrary to belief.
Remember, you don’t get a bill for Corporation Tax, it is self-assessed. There are specific things you must do to work out, pay and report your tax and JT AccountS are here to help advise you on this. Simply call us on 0208 362 1720.
Here are a few tips on what every business owner should know to ensure they are not paying more than they need to:
– claim all your business expenses such as rent and rates, repairs, heating and lighting but also be sure to include professional insurance, bank charges and accountancy fees;
– make sure you pay yourself a salary. Your business is a separate legal entity, so you need to pay yourself a salary;
– company purchases: buying what you need for your business should be bought through your company as this is the most tax-efficient way;
– make an early payment to HMRC and they will owe you interest! If you can pay your Corporation Tax bill early, HMRC will give you some of it back in the form of interest.
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