Business Income Tax
Business Income Tax, sometimes known as Corporate Income Tax, is the tax bill paid by UK limited companies on an annual basis.
This tax is imposed by the Government on income that is generated by a business. It is used to fund public services, goods for citizens and to pay Government obligations.
Currently, the rate for Business Income Tax is set at 19%. This is set for the financial year of 2022-2023.
Who Pays Business Income Tax?
Business Income Tax is paid by any limited company in the UK. How much they are required to pay is determined by their accounts that are filed each year to Companies House and HMRC, alongside their Companies Tax Return.
It is due to be paid 9 months and 1 day after your accounting period has ended. Any late payments can incur fines. These fines will depend on how late you pay your bill but can be up to 20% on top of the bill itself!
This is why having an accountant on hand can be important for any business. An accountant will ensure that your accounts and tax return are filed on time, and any tax to be paid is clearly noted and paid on time.
Could You Possibly Reduce Your Bill?
There are ways in which you could possibly reduce your Business Income Tax. Again, having an accountant on hand to help with this can be important. At 6 Wands, our accountants are highly trained and would be able to work through this process for you or with your in-house team, ensuring any reductions are valid and taken into account.
Possible reductions to consider may include:
- Expenses - Expenses that allow your business to stay running smoothly can be deducted from income.
- The Super Deduction - Any allocated funds for investment may allow entitlement for tax allowance.
- R&D Relief - Any products being produced that may advance science or technology may be subject to R&D Relief.
- The Patent Box - Patented products that attribute to your generated income may qualify for 10% tax rate, not the full rate of 19%.
- The Annual Investment Allowance (AIA) - Capital expenditure can be expensed for the business.
- Employee Share Scheme - If your business qualifies for this scheme, you may be eligible for a tax deduction.
Any other possible means of deduction are also considered by your accountant at the necessary time.