Setting up
your business

Corporation tax is paid by limited companies on their taxable profits.

You must pay it within 9 months of the end of your company’s corporation tax accounting period (although you get an extra 3 months to file your corporation tax return).

Your corporation tax accounting period

You pay corporation tax on the taxable profits you earn in each corporation tax accounting period.

This is usually a 12-month period that matches your company’s financial year - although they can differ when you start up (when your corporation tax accounting period may be longer than 12 months) or if you change your financial year dates.

Your taxable profits

Your taxable profits are your profits before tax minus any relevant allowances, charges, reliefs and losses.

Corporation tax rates

There are two rates of corporation tax in 2009-10:

• Lower rate - 21%
• Upper rate - 28%

The lower rate is paid by companies whose taxable profits are less than £300,000.

The upper rate is paid by companies whose taxable profits are more than £1.5 million.

Between those two figures, marginal rate relief is available (this is to avoid companies paying 21% tax on £299,999 but 28% if they made £2 more profit (£300,001).)

You can see a table of current and past rates and limites on the HMRC site.

Keeping records

Get an accountant to do your corporation tax for you. It will be much simpler.

Either way, you need to register the business with HMRC - this is a legal requirement. If you do use an accountant, you can tell them who it is.