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Corporation tax is the direct tax that a business must pay as soon as they begin to earn a profit and then on an annual basis thereafter. Companies must register for corporation tax themselves within three months of starting trade and the rate of this tax is set by the government.
The time your corporation tax is due is different for all companies, but it is generally nine months and one day after the end of your accounting year. Not paying corporation tax when it's due can incur penalties and HMRC can often charge you interest. Corporation tax can be paid by multiple methods, such as online banking, CHAPS, direct debit, telephone banking by BACs or at your bank.
From 1st April 2023, the corporation tax main rate for non-ring-fenced profits increased to 25% (applying to profits over £250,000.) A SPR (small profits rate) was also introduced for companies with profits of £50,000 or less, so that they will continue to pay corporation tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.
Corporation tax loans enable businesses to pay their tax bills in monthly instalments as opposed to one lump sum. The loan can be secured, meaning that the business owner provides the lender with an asset that the lender can take if payments are not made. Or it can be an unsecured loan meaning that an asset is not being used as security.
There are multiple reasons why a tax loan may be beneficial to a business depending on the unique circumstances they are facing.
Paying your corporation tax in one lump sum can mean a large capital outlay quickly leaving the organisation - this can lead to limited cashflow in the business which may be required for further requirements or investment.
By spreading the cost over manageable monthly payments and at a fixed rate, organisations have a better idea of how their cashflow will be affected and therefore manage it more effectively. This can also allow businesses to budget more accurately. By managing and preserving working capital funds businesses can make investments beyond day-to-day costs, meaning you can invest in growing your business.
If you do not tell HMRC that your business is liable for corporation tax, a penalty is calculated by taking the amount of tax that is owed and applying a percentage. There are also interest charges if corporation tax is paid late. Ultimately not being fully prepared to pay corporate tax in full can lead to financial penalties but by utilising a tax loan and paying in manageable installments, you can be put at ease knowing that it’s been paid.
Bluestone is an ethical and FCA-regulated finance intermediary. We are committed to ensuring that our clients make informed financial decisions based on their requirements and always recommend that our clients seek independent financial advice from an authorised source before committing to any financial agreements.
If you would like to explore corporate tax loans in more detail, get in touch using the enquiry form below. One of our friendly and experienced team will be in touch as soon as possible.
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