Corporation tax is a tax levied on the profits of companies and other organisations in the UK. It is one of the main sources of revenue for the government and is used to fund public services such as healthcare, education, and infrastructure.
In the UK, corporation tax is levied at a flat rate of 19%, which applies to all profits earned by a company, regardless of the size of the company or the amount of profit earned. However, companies that have profits of less than £50,000 may be eligible for a small profits rate of 19%, which applies to profits up to £300,000.
Companies are required to pay corporation tax on their taxable profits, which are calculated by subtracting allowable expenses from the company’s total profits. Allowable expenses include things like employee salaries, rent, and other business-related expenses.
In addition to the standard rate of corporation tax, there are also a number of reliefs and exemptions that can reduce a company’s corporation tax liability. For example, companies may be eligible for research and development (R&D) relief, which allows them to claim back a portion of the costs associated with R&D activities.
Corporation tax is usually paid by the company itself, although in some cases, it may be payable by shareholders or other stakeholders. Companies are required to file a corporation tax return and pay any corporation tax owed on a quarterly basis.
Corporation tax is an important source of revenue for the government, but it can also be a burden for companies, especially those that are highly profitable. As a result, the UK government has implemented a number of measures to help companies manage their corporation tax burden, including reliefs and exemptions. It is always a good idea for companies to seek advice from a tax professional or financial advisor to ensure that they are paying the appropriate amount of corporation tax.