Running a limited company means having to file and pay a corporation tax return each year.
Throughout this time, you’ll acquire various pieces of information you’ll need to send through to HMRC and decide which payment method you’d like to use.
So let’s look at how you should pay your corporation tax bill.
How much should you 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 bands, marginal relief will apply at a tapered rate.
If no corporation tax is due, you’ll still need to complete a return and also send through a no corporation tax payment due form.
When should you pay?
For most businesses, paying corporation tax is done once a year. You’ll have nine months and one day after your accounting period to pay the corporation tax due.
The accounting period is normally the financial year of your business, but some startups may well run through two periods in their first year of operation.
If, however, you’re recording more than £1.5 million in annual profits, you’ll need to make yours in instalments.
How do I pay corporation tax?
The next stage is to submit your tax return before the deadline. There are several ways to pay your bill, including via direct debit, online banking or popping into your bank.
If you operate as part of a group, you may also be able to pay your corporation tax bill through a group pay arrangement.
Payment methods will obviously affect how much time you need for it to be completed. If your payment date is on a bank holiday, for example, you would be required to pay earlier so that the money reaches HMRC in good time.
Alongside your chosen payment method, you’ll need to provide your 17-digit corporation tax reference number for the accounting period you’re paying for.
The reference number will be listed on your “notice to deliver tax return” letter, on HMRC’s reminders and notices, or listed in your HMRC online company account.
There will be a new number for each accounting period, so ensure you’ve got the correct one. If you use an incorrect number, you may find your payment delayed.
You can pay directly through your company’s HMRC online account.
Allow five working days when you set up a direct debit to HMRC for it to process. Once authorised, your direct debits should only take around three days to go through the system.
Online and telephone banking
Use your “notice to deliver your tax return” to find which bank account to pay into if you make an online or telephone payment.
These payments will normally reach HMRC on the same working day.
Another option is paying via a debit or credit card (normally corporate). However, these will incur a fee, and if you can’t make the full payment you’ll need to use a different method.
At your bank or building society
To pay at your bank, you’ll need a slip from HMRC that details your requirement to pay there.
If you make a payment via cheque, you’ll need to make it payable to “HM Revenue and Customs only” and write your corporation tax payment reference on the back.
This will take around three working days to reach HMRC.
Don’t miss your corporation tax return
Paying your corporation tax bill accurately and promptly is vital – if you miss the deadline, you could face penalties. If you pay early, on the other hand, HMRC may pay you interest.
You’ll know as a business owner that running a company comes with hours of work and bags of responsibility, which is why you need an accountant by your side.
We’ll help get your accounts and books in order and make sure you’re not swamped with administrative burdens.
We can support you with any aspect of your business so that when the time comes to file your return, you’re in control of the situation and have more hours to spend working on your business.
Let’s talk today about your business and corporation tax return and help get you prepared for submission.