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Contractor Corporation Tax 2024/25: UK Limited Company Guide

Contractor Corporation Tax guide.

Contractor Corporation Tax guide.

Introduction 

Our limited company contractor Corporation Tax guide covers the basics of this. Limited company Corporation Tax (CT) is a tax for a contractor professional with their own UK limited company. Contractor CT is the main UK contractor limited company tax you’ll pay each year when you make profits. This UK company tax return guide 2024 looks at a Corporation Tax return for contractors. In addition, we’ll look at how to complete the Corporation Tax return (UK) for UK contracting professionals. All UK trading companies complete their CT return once per annum and file this and their full accounts with HM Revenue & Customs (HMRC). Therefore, in this contractor guide, we’ll look at how CT works for UK contractors and how to do a Corporation Tax return (limited company).

Under the UK tax system, UK individuals file personal tax returns with HMR each year. In addition, they pay Income Tax on their personal taxable incomes. On the other hand, UK companies file Corporation Tax returns for limited company purposes each year. In addition, businesses pay Corporation Tax (UK) on their taxable profits. Furthermore, UK limited companies pay CT on their profit to HMRC every 12 months. HMRC will usually issue a notice to deliver a company tax return (UK) each financial year to you as a limited company contractor owner.

Initial thoughts 

First thoughts on contractor Corporation Tax

In this corporate tax guide, it’s key to highlight contractor CT as the main tax for a limited company. Besides this corporate tax (UK), when you run your own company, there may be other contractor taxes (UK). Besides Corporation Tax for limited companies, other taxes may include Value Added Tax (VAT) and PAYE/NIC on salaries. Moreover, other guides on this contractor’s website cover limited company UK tax areas.

What are the three main duties of a company director each year?

When you’re a director running your own company, you have some annual filing duties. These duties include filing company documents and meeting their due dates and tax deadlines. Therefore, your business has three main responsibilities regarding company accounts and tax every year.

File accounts with Companies House

The reports you file with Companies House are a reduced version of the full annual accounts. This is because Companies House requires less information. As a result, not all the data from the company’s full accounts are shown on public records. The due date for filing accounts with Companies House is nine months after your company’s year-end. In the case of a company’s first set of accounts, they’re due for filing either twenty-one months after the incorporation date or nine months after the company year-end, whichever is earlier.

File the full annual accounts and CT return with HMRC

The company’s UK Corporation Tax return (HMRC) is called form CT600. You must complete this contractor tax form for your company annually. After completing the CT return, you can submit the Corporation Tax online to HMRC. When you complete and file Corporation Tax, contractor options include doing this yourself or asking your accountant to file the CT return.

When you or your accountant file your company accounts and tax return, how do you do this? This can be done through specialist online Corporation Tax filing software (UK) or the HMRC website. When you do this, you’ll file your CT return online along with your company’s (full) accounts with HMRC. What’s more, when you file the CT return, the due date for the CT600 & company accounts is twelve months after the end of the accounting period to which the CT return relates.

Pay your contractor Corporation Tax bill to HMRC

In this UK tax guide on CT, it’s key to highlight your company must pay its tax bill by the Corporation Tax deadline each year. However, when is the deadline for paying Corporation Tax to HMRC? When we research this, payments are due nine months and one day after the end of the accounting period to which the payment relates. Indeed, the Corporation Tax due date is always this length of time, and your company should pay this on or before the payment is due.

Initial considerations on UK contractor Corporation Tax returns 

When do you receive your CT reference number?

Nowadays, when you register a new company with Companies House, they’ll inform HM Revenue & Customs (HMRC) of your company’s existence. Then, shortly after incorporation, HMRC will send your Corporation Tax reference number through the post to your company’s registered office. Your CT number is your limited company UTR (Unique Tax Reference) and is unique to your company.

If you’ve recently set up a new UK company and can’t find your CT reference number, you should request a Corporation Tax UTR from HMRC. You can do this by phone, and once you’ve done this, they’ll post the UTR to the company’s registered office.

As part of this HMRC company tax return guide 2024, please note that your CT reference has an initial three digits for the CT office. In previous times, the office was in the UK area that looked after your company, however nowadays it’s centralised. What’s more, two sets of five digits make up the full Ltd company UTR number. Furthermore, the UK company tax number is shown on:

  • The CT600 form that you file with HMRC each financial year.
  • All correspondence from HMRC. That includes any HMRC reminders and the annual letter to deliver a CT return. This is a yearly notice that notifies you to complete your company’s CT600 return on time.
  • Your company’s CT service within your online Business Tax account with HMRC. We recommend setting up a Business Tax account with HMRC as part of your initial company tasks. Once the account is set up, you can add the Corporation Tax (HMRC) service. This allows you to track your company’s liabilities, any tax to pay, and future payments.

Other guides

For ease of reference, we’ve written about taxes for a limited company and the filing dates for company documents and tax payments. What’s more, we have a guide covering what you should consider if you want to change your contractor accountant.

Deliver a UK company contractor tax return form

All companies must deliver a CT600 tax return to HMRC each year. Moreover, they should pay CT on their profits, regardless of their size or their level of profits.

How much tax does a limited company pay?

As a limited company contractor, your business should record all allowable business expenses. Next, it’ll deduct these expenses from business income to arrive at a profit in the company accounts. You must add certain costs (such as entertainment, penalties, fines, etc.) back onto the profit in the company tax calculation to arrive at a revised profit, as these expenses aren’t tax-deductible. We then apply the appropriate ltd tax rate to the adjusted profit to calculate the tax on limited company profits. In turn, this is your company’s tax bill.

UK contractor CT guide & initial considerations 

Current contractor CT rates

How much is Corporation Tax for a limited company (UK)? The annual calendar year ends on 31 December, whereas the company tax year in the UK ends on 31 March.

The current Corporation Tax (UK) rate for UK companies is 19% upon the first £50K of profits. Please see the next section for changes on how much tax you pay on profits above this amount. In the company tax year ended 31 March 2023, all companies will pay CT at this rate on their taxable profits. In previous years, large companies paid a higher rate of CT than smaller companies. 1 April 2015 was the date HMRC lined up the rates for small and large companies.

Recent changes for Corporation Tax in the UK

Following the March 2021 Budget, the Chancellor confirmed an increase in the CT rate. This change came after all companies had the same CT rate for several years. Furthermore, this increase was confirmed in the March 2023 Spring Budget. Therefore, from 1 April 2023, the 19% rate increased to 25% on profits above £250,000, with marginal relief for profits between £50,000 and £250,000.

This means a company with profits:

  • Up to £50,000 will pay CT at 19%.
  • Between £50,000 and £250,000, UK companies pay 19% on the first £50,000 and a marginal rate on the remainder.
  • Above £250,000, UK companies pay 25% on all the profits.

Fiscal years

The company tax year or `fiscal year’ runs from 1 April to 31 March. The personal tax year runs from 6 April to 5 April.

Depending on your company’s year-end, your fiscal year may differ from your accounting year. You’ll apportion your profits accordingly if the CT rates change following a budget. This means the profits are apportioned on the HMRC Corporation Tax return between the company tax years. As a result, the profits are taxable in your company contractor CT return, partially at different rates.

UK contractor Corporation Tax 2024 -what else to consider?

Company year-end 

This contractor Corporation Tax guide now looks at the company year-end for your small business. On the day your company is set up, the year-end automatically defaults to the end of the month in the following calendar year. Therefore, if you incorporate your business on 26 June 2023, the year-end defaults to 30 June 2024.

In the above example, you may prefer a different company year-end for your business. If so, you or your accountant can submit a form to Companies House to request this change. You can also change your business year-end in the future. You can, however, only `extend’ your accounting period once every five years. In contrast, there are no restrictions if you shorten your business year-end.

How do you calculate the company profits that are subject to CT? 

Our contractor HMRC CT600 return guide now covers calculating your company’s profits and the contractor CT bill process.

At the end of every financial year for your company, you must determine what profits are subject to CT. Indeed, after calculating the profits, you can work out the Corporation Tax due on these. To do this, you’ll perform a company tax calculation, which accountants call a tax computation. Next, you’ll report these on the company’s Corporation Tax return (contractor CT return) form CT600. In fact, in this CT600 form guide, it’s key to mention further CT600 guidance on the HMRC website. There is also a company CT600 guide available online from HMRC.

As part of this contractor CT guide, please note your accountant will add up all the business income before completing your CT600 return. They’ll then deduct the sum of any business expenses, including salaries. In the company tax workings, they’ll add back to the profit any disallowable expenses for Corporation Tax (depreciationentertaining costs, penalties or fines). Indeed, disallowable expenses (HMRC) are any costs that aren’t `wholly and exclusively’ for the purpose of your trade or business and, therefore, can’t be claimed as tax deductions. Next, the company deducts any income that isn’t taxable from the profit. Finally, they deduct capital allowances and any other tax reliefs to arrive at taxable profit. The taxable profit is subject to CT and is reported on the Corporation Tax CT600 return to HMRC.

Fiscal year & rate change

As part of this HMRC CT600 guide 2024, if the business year spans the `fiscal year’ (see above), and the rate has changed, you’ll apportion your profits over the appropriate number of days. You can then work out the tax at the applicable rates and arrange to pay the CT in due course.

Example of UK contractor Corporation Tax (limited company)

Let’s assume your UK contracting company year-end ends on 30 June.

The accounts covering the year to 30 June 2024 has:
a) 274 days (1 July 2023 to 31 March 2024) profits taxable at the appropriate rate(s) in 2023/24.
b) 91 days (1 April 2024 to 30 June 2024) profits taxable at the appropriate rate(s) in 2024/25.
Therefore, for both tax periods above, the profits are taxable at either:
a) All at 19%.
b) The first £50K at 19% and the rest at a marginal rate.
c) All at 25% (see above).
To reiterate, if the profits are no more than £50,000, the tax rate is 19%.

File tax return online (limited company) 

In this CT guide, let’s look at how to file the contractor CT600 form online. Once your company’s accounts and the CT computations are final, you or your accountant can file your Corporation Tax return online along with the company accounts. With modern technologies, you can now file your CT600 form online via specialist online Corporation Tax software (UK) or even the HMRC website for more straightforward cases. As part of the process when you file CT600 online, you should check all the numbers are correct before you submit CT600 returns and accounts to HMRC.

CT return CT600 filing deadline 

The CT600 deadline is 12 months after your business year-end. Therefore, if your company’s year-end is 30 June 2024, your contractor Corporation Tax deadline by which to file the CT return with HMRC is 30 June 2025.

Corporation Tax payment deadlines are nine months and one day after the end of an accounting period. Therefore, if your company year-end is 30 June 2024, the HMRC Corporation Tax payment date is 1 April 2025.

How can you pay your contractor Corporation Tax to HMRC?

In today’s world, when it’s time to pay, most UK contracting companies opt to pay Corporation Tax online. What’s more, you can still pay at the Post Office or Bank counter; however, paying via cheque through the post is no longer available. If you pay online via the HMRC website or through your company’s internet banking, it’s much quicker. What’s more, most banks now offer a faster payments service as part of internet banking. Therefore, when we look at the most common methods for paying Corporation Tax, a company can pay it in several ways. To sum up, most limited company contractors now pay their CT by internet banking; however, if you pay by card:

  • There’s a fee if you pay by corporate credit card or debit card.
  • There’s no fee when you pay by personal debit card.
  • You can’t pay with a personal credit card.

Please bear in mind you should allow some time for your payment to reach HMRC, depending on how you pay:

Payment method Time needed
Online or telephone banking Same or next working day
CHAPS Same or next working day
BACS Three working days
Direct Debit Three working days
Online by debit or corporate credit card Three working days
At your bank or building society Three working days
Direct Debit (if you haven’t set one up before) Five working days

Accounting periods

Company accounting tax periods can only cover a maximum of twelve months. When your company is set up, its first period may be longer than twelve months. Also, if you extend your company year-end at some point, the period could be longer than twelve months. In this case, the company has two Corporation Tax accounting periods and must file two CT600 forms. The first return is for the first twelve months of your accounting period, and the second is for the remaining days up to the business year-end.

In the above example, if your company commences trade on the actual day it was incorporated, which was 26 June 2023, it’ll complete two CT600 returns that cover:

  • The twelve months to 25 June 2024.
  • The period from 26 June 2024 to 30 June 2024.

Other considerations in our UK contractor Corporation Tax guide 2024

Corporation Tax penalties & how do they work? 

Next, we look at the CT600 late filing penalties in this CT guide. When you file your company’s CT return, the due date is twelve months after your company year-end.

There is now a new HMRC link to appeal against a CT penalty if you have grounds for this.

Therefore, if the company misses the Corporation Tax deadline, the following CT600 penalties will apply:

One day late £100 penalty
Three months late A further £100 penalty (£200 in total)
Six months late 10% of the unpaid amount
Twelve months late A further 10% of any unpaid tax (20% in total)

Contractor CT (UK) & CT losses

There is no CT on company losses, i.e., a company only pays CT on its trading profits. Therefore, when a company makes a trading loss, it can either:

  • Carry back the loss against profit for the previous twelve months or
  • Carry the loss forward against future profits.

A loss can be carried forward indefinitely to be set against future profits.

When a company closes down, it can claim `terminal loss relief.’ This means It can carry back any losses against profits in the three preceding years before the final accounting period.

Final thoughts 

This Corporation Tax guide looks at most areas affecting your contracting limited company regarding CT. As mentioned earlier, CT is your main contractor tax (UK). Your contractor accountant will typically handle the preparation of this. In addition, they’ll file an HMRC CT600 return for your company each financial year. Meanwhile, you can arrange to pay your company’s tax liability. Alternatively, if you plan to file the HMRC corporate tax return yourself, this guide explains the process.

This company tax guide for limited companies explains the process for completing a contractor Corporation Tax return. In addition, we show that this isn’t always straightforward. It’s more complex if there’s been a change in CT rates or capital allowances. Moreover, filing a UK corporate tax return to satisfy HMRC requirements isn’t always straightforward. They now require specific `tagging’ for the figures in the accounts. Indeed, accountants use specialist HMRC Corporation Tax online filing software to do this. Therefore, if you have an excellent accountant to look after you, they’ll usually take care of this.

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