Once you have formed a limited company, your business becomes its own legal entity. If you haven't registered your company yet, you can register it using our company formation service. It will be subject to various guidelines you may not be familiar with, and you will be forced to take on a new set of financial responsibilities.
Most of these responsibilities must be carried out through HM Revenues & Customs (HMRC).
HMRC is the non-ministerial government department responsible for collecting tax and ensuring the UK’s public services remain funded. HMRC was established by Act of Parliament in 2005 to replace the Inland Revenue and Customs and Excise. Today, HMRC facilitates domestic and international trade and is responsible for general tax oversight.
As a new limited company, your business will be required to fulfil a number of tax obligations. The most substantial responsibility you will need to take on is corporation tax.
Most UK companies are legally required to pay a corporation tax proportionate to the profits they are generating. If your company buys goods or services to make a profit, receives income, manages investments or employs staff, you will be subject to pay corporation tax through HMRC.
Presently, there are two rates of corporation tax that apply to UK businesses. These are:
This rate applies to your company if it earns less than £300,000 per year in profit. You will be taxed at a rate of 20%.
Larger companies must pay slightly more. If your company earns more than £300,000 per year in profit, you must pay a 21% corporation tax rate.
You will also be required to enrol in HMRC’s PAYE payroll system. It ensures that income tax and National Insurance Contributions are taken directly out of employee wages at the time if payment. Youi can learn more about PAYE and payroll in our Accounts & Finance guide.
To fulfil these obligations, you will be required to register with HMRC immediately after incorporation.
Shortly after your limited company is registered with Companies House, HMRC will be automatically informed. You do not have to contact HMRC to let them know your company is now trading. You should receive items of mail from HMRC at the registered office address you gave to Companies House at the point of incorporation. These items of mail include your company’s Unique Taxpayer Reference (UTR).
Your UTR is extremely important. You will need to quote it each time you contact HMRC or submit information or payments. Put this in a safe place immediately. You should additionally receive information to let you know how to register your business online for tax purposes.
When registering online with HMRC, you will be asked to submit certain information about your company. If you choose to register online, your company will also be automatically registered for corporation tax.
When registering with HMRC, you will be expected to include the following information:
After you submit this information, HMRC should then send another letter to your registered office address to inform you of your company’s corporation tax deadlines. That letter should also confirm your deadline for submitting Corporate Tax Returns.
Corporation tax will always be due before your company tax return. It should usually be paid electronically within nine months and one day of the end of each accounting period. This date will also be the end of your company’s financial year, and HMRC will inform you of your company’s exact deadline.
Your limited company is responsible for working out how much it owes in corporation tax. If you are a director, you are legally responsible for making sure your company pays the correct amount of tax. Because of this, most companies hire an accountant to help them assess their annual tax obligations.
To pay corporation tax, you must follow these steps:
For further advice, contact HMRC or consult an accountant.
Your company must file a tax return with HMRC within one year of the end of its incorporation. After that, you must file once every 12 months. You can file your annual return up to 28 days after the due date has passed.
To compete your annual return, you must include:
You may also need to include:
You can file your annual return online. It costs £13, which can be paid by credit card or PayPal. You can also send your annual return by post. To do this, you must download and fill in an annual return form and post it to Companies House. This method costs £40, and you must include a cheque with your company number written on the back.
There are a number of other reasons you will have to liaise with HMRC throughout your company’s lifecycle. Many of these purposes will relate directly to your employees and their taxable income, while others will relate to your annual company accounts. You will also be required to notify HMRC if you have been payrolling benefits.
To contact HMRC, you can fill in an online form here.
For more information on basic accounting and the financial information you will be required to disclose to HMRC, consult our Accounts & Finance guide.