Corporate or corporation tax in the United Kingdom (UK) is a complex taxation mechanism. The governments have made several modifications to corporate tax over the years. Every business works at a different scale and in different markets, which makes it important to have a thorough understanding of corporate tax so you neither pay less nor pay more than what you owe to the government.
In this article we will discuss how corporate tax works in the UK and what will happen if you don’t pay it. Let’s begin!
1. Online or Telephone Bank Transfer: You pay corporate tax by CHAPS, Faster Payments or Bacs. If you are unsure about the account , use the following account:
In this article we will discuss how corporate tax works in the UK and what will happen if you don’t pay it. Let’s begin!
What is Corporate Tax?
A tax that applies to a limited company’s profits is called corporate tax. In the UK, corporate tax applies to resident companies and branches of companies based in a foreign land. The following table shows the corporate in the UK in recent years.| Rate Band | 2021/22 | 2022/23 | 2023/24 | 2024/25 |
| Small Profits Rate (Profits less than £50,000) | – | – | 19% | 19% |
| Main Rate (Profits above £250,000) | – | – | 25% | 25% |
Who Pays Corporate Tax in the UK?
The UK levies corporate tax on all limited companies. Usually, this tax must be paid on companies’ annual profits. However, certain unincorporated organisations might also have to pay corporate tax in the UK. These include:- Trading and housing associations.
- Co-operatives.
- Member associations or clubs.
UK Corporate Tax Tiers
The UK’s 25% corporate tax rate is only for companies with annual taxable profits amounting to £250,000 or more. Businesses with annual taxable profits of £50,000 or less need to pay 19% as corporate tax. As for the companies that earn between £50,000 and £250,000 annual taxable profits, they also get a Marginal Relief from the government.| Rate Band | 2021/22 | 2022/23 | 2023/24 | 2024/25 |
| Marginal Relief (Lower Limit) | – | – | £50,000 | £50,000 |
| Marginal Relief (Upper Limit) | – | – | £250,000 | £250,000 |
Who Pays the UK Corporate Tax in a Company?
The UK tax law says that corporate tax returns must be filed by a company’s director or directors, depending on its structure. The tax returns are to be filed with His Majesty’s Revenue and Customs (HMRC) department, which is the national taxing authority of the UK. HMRC oversees the collection of all direct and indirect taxes and administers tax credit payments to the taxpayers. Companies can hire tax specialists and accounting firms, such as SwiftBooks, if they want, however, in case of any discrepancies in tax returns, the director(s) will be held responsible.Corporate Tax Payment Process
There are three ways a company can pay corporate tax in the United Kingdom:1. Online or Telephone Bank Transfer: You pay corporate tax by CHAPS, Faster Payments or Bacs. If you are unsure about the account , use the following account:
- Sort Code: 08 32 10
- Account Number: 12001039
- Account Name: HMRC Cumbernauld
- Sort Code: 08 32 10
- Account Number: 12001020
- Account Name: HMRC Shipley
- Your cheque must be payable to ‘HM Revenue and Customs only’
- Write the 17-character Corporate Tax payment reference number on the back of the cheque
- Set up Direct Debit through your company’s HMRC online account
- Use your Corporate Tax payment reference number
Corporation Tax Deadline
A company needs to file the UK corporate tax return 12 months after the end of the accounting period. Small companies in the UK need to clear their corporate tax bill 9 months and 1 day after the end of the accounting period. Large companies are required to make corporate tax payments in instalments.Penalties for Missing the UK Corporate Tax Filing Deadline
The UK corporate tax law says that a fine of £100 will be imposed on any company that files its corporate tax returns late. The fine increases to £200 if the company fails to file returns for 3 months after the deadline. If 6 months pass after the deadline without filing the corporate tax return, the company must pay 10% of its unpaid corporate tax. HMRC imposes 20% of unpaid corporate tax as a fine if a company does not file its tax returns for a year after the deadline. In case a corporation files its corporate tax return late 3 times in a row, the £100 fine is increased to £500.What if You Don’t Pay Your Corporate Bill?
If you neither pay your corporate bill nor engage with HMRC, the authority can take several actions against your company. These include:- Selling the company’s assets,
- Taking help from debt collection agencies
- Recovering the owed payment from the company’s bank or building society account,
- Initiating legal action against the company, and
- Closing down the business.
Submitting Inaccurate Information with Corporate Tax Return
It is crucial for businesses to submit accurate information when filing their corporate tax returns. The revenue collection authority can impose different penalties depending on how inaccurate the information was and whether you submitted it intentionally or not. Here are a few categories of fines for submitting wrong information in your corporate tax return.- Accidental Errors: HMRC can hand you a maximum fine of 30% of your corporate tax bill if your company makes an accidental error while filing its corporate tax returns.
- Intentional but Unconcealed Errors: The fine amount can go up to 70% in case of a deliberate discrepancy, depending on whether you informed HMRC about the mistake or not.
- Deliberate, Concealed Discrepancies: HMRC can ask a company to pay up to 100% of its corporate tax bill as a fine in case of deliberate and concealed discrepancy.