The United Kingdom is one of the most important financial centers in the world. The idea of establishing a company in this country, which offers a prestigious career and successful investment opportunities, is very attractive to investors. Corporate tax is one of the most important things to know before establishing a company. In this article, we explained the corporate tax system in the United Kingdom.
Details about UK Corporate Tax System
The corporate tax is applied to the profit that businesses make during the fiscal year. Companies should make payments 9 months and 1 day after the end of the accounting period. Payments are usually made on January 1st. The corporate tax rate for 2021 is 19%.
Companies whose center of activity is in the United Kingdom are required to declare the Corporate Tax to Her Majesty's Revenue and Customs (HMRC) by completing the CT600 form. In this form, the company's net profit after subtracting tax deductions and operating expenses is reported, and the tax is calculated. Payments can be made on the website, by card, by phone, or by the direct debit method. It is important to know the details about VAT to understand the corporate tax system.
VAT is a tax added to the cost of goods and services. Registration to VAT is optional, and companies do not need to pay VAT unless they exceed the annual turnover threshold (£ 85,000). If VAT is required, payments should be made every 3 months. VAT refund is sent to HMRC within 37 days starting from the end of the 3 months.
Limited companies must report annual tax returns to Companies House, compile legal accounts, report declaration to HMRC, and register with VAT.
In partnerships, business partners must pay their taxes over their share in the profits of the enterprises. Partners must pay national insurance, prepare a personal self-assessment and tax return, and register with the VAT system if their income exceeds £ 85,000. In limited partnerships, a self-assessment tax return must be prepared every year. If company earnings exceed the threshold, they must register.
Traders are free to spend after paying taxes to the state. If their profit at the end of the year is above the tax exemption (£ 12,570), they must pay taxes. Other than that, there is no extra taxation for sole traders.