What limited company tax do you need to pay?

Let’s be real, limited company tax is the last thing you want to deal with when you’re trying to run your business. But hey, avoiding it isn’t an option. 🫣

Understanding what taxes your company needs to pay is essential to keeping your business on track. From Corporation Tax to VAT, each tax has its own rules and deadlines. Here’s a rundown of the key taxes LTD companies need to be aware of.

Corporation Tax 

Ah, the big one: Corporation Tax. This is a key part of your limited company tax responsibilities and it’s non-negotiable! 

It’s the tax your LTD company pays on its profits, including trading income, capital gains and investments. If your company makes money, HMRC wants a slice. 🍰

How much corporation tax do companies pay? 

Corporation Tax isn’t one-size-fits-all, it depends on how much profit your company makes:  

When and how to pay company tax 

As part of your limited company tax obligations, Corporation Tax is due 9 months and 1 day after the end of your accounting period. 

You’ll need to pay company tax online via the HMRC portal. It’s a good idea to set up your payment well in advance so you don’t face any late fees. 🏃

VAT (Value Added Tax) 

If your company sells goods or services, VAT’s got a seat at your table. It’s charged on the value added at each stage of the production and sale of goods and services.

When should you register for VAT? 

You must register for VAT if your turnover exceeds £85,000. Below that, registration is optional, but may still be beneficial. For example, if you work with other VAT-registered businesses, you could reclaim VAT on your expenses. ⚖️

How to calculate and pay VAT 

VAT is calculated on your sales and reported quarterly, unless you’re using a different VAT scheme. 

It’s another important part of your limited company tax responsibilities. Your VAT rate depends on what you sell, with some items qualifying for reduced or zero rates:

Employer’s National Insurance contributions

As an employer, you’re responsible for National Insurance (NI) contributions. These help fund the state pension and other social benefits. 👩‍💻

How much employer’s NI does you need to pay? 

As part of your LTD company tax obligations, you’ll need to pay Employer’s NI on your employees’ earnings:

Other taxes to consider 

In addition to the main limited company tax responsibilities we’ve covered, there are a few other taxes you might need to stay on top of:

• PAYE (Pay As You Earn): as an employer, you usually need to operate PAYE through your payroll. It’s HMRC’s system for collecting Income Tax and NI, which you deduct from employees’ wages and pass on to HMRC. 
• Dividends: when you pay yourself a dividend from your company’s profits, you’ll pay tax on that income. The first £1,000 is tax-free, but after that, the rate depends on your income bracket. 💰
• Employee’s NI contributions: employees pay National Insurance, which is deducted from their wages. You, as the employer, handle this deduction and pay it to HMRC. 

How about tax-deductible expenses?

Great question! Tax-deductible expenses are a smart way to reduce your business’s tax burden. These are the necessary costs you incur to keep your business running and they can lower your taxable profits. 🎉

Here are some examples:

• Rent & utilities: the cost of your office or business space, including electricity and water bills. 💡
• Office supplies: things like stationery, printer ink and paper.
• Marketing & advertising: costs for promoting your business, from online ads to print materials.
• Business travel: train fares, fuel, taxis, flights, hotels etc.  ✈️
• Training & development: investing in courses or workshops to level up your employees skills.
• Professional fees: Payments for accountants, legal advice and other professional services. 

Keep track of your expenses and make sure you’re taking full advantage!

What happens if I don’t meet my tax obligations? 

If you think avoiding taxes will somehow work out, think again. Not paying or filing your taxes correctly can lead to penalties, interest and possibly even attention from HMRC. 🫠

Staying on top of your LTD company tax obligations is the best way to avoid these issues.

Penalties for failing to file or pay 

Late payments, late filings or underpayment can lead to hefty fines. Plus, you could face interest charges on unpaid amounts, so it’s crucial to stay on top of things. 🧮

How to Stay Compliant 

The easiest way to stay compliant is to set reminders for filing deadlines and payments. Better yet, get a good accountant (hello, TaxScouts 😉) to ensure your tax obligations are covered and your paperwork is filed on time. 📅

You’ve got this!

So, what limited company tax do you need to pay? It’s a mixture of Corporation Tax, VAT, Employer’s NI and a few others depending on your business structure. The moral of the story? Stay on top of your taxes, claim your expenses and if you’re unsure, ask for help. 🙋