Limited Company Tax Returns

When you set up a limited company you’ll have dates to submit annual accounts to Companies House and a company tax return to HMRC. The period covered by your tax return can’t be longer than 12 months so if you have been trading for longer than that, you may have to file two tax returns to cover the period of your first accounts. If you do, you’ll also have two payment deadlines. In the following years, you will usually only file one tax return.

Self-Assessment Tax Calculator

Tax returns

What is a company tax return?

A company tax return (form CT600) is the document you use to report your company’s profits or losses for the tax year. It’s different from a Self Assessment tax return, which is for individuals rather than companies, but if you’re a Director of a company you’ll need to file one of those as well.

A company tax return is used to work out how much Corporation Tax a business owes on it profits. It’s absolutely essential to get these calculations right. Even if your company made no profit at all, HMRC will still expect to see a company tax return from you.

When to file

When to file a company tax return?

There’s a time limit for sending your company tax returns to HMRC of 12 months after the end of the “accounting period” (usually a full tax year) they relate to. If you miss that deadline, there are penalties that start at £100 and rise from there.

Not all companies match their accounting periods to the tax year, so there’s no single target date that every business has to hit. Whatever accounting period you use, though, you need to file your company tax return within 12 months of it ending.

When do I file?

Will HMRC tell me when I need to do a tax return?

All UK Limited Companies are supposed to be sent a “notice to deliver a Company Tax Return (CT603)” to let them know that HMRC is expecting a tax return from them. You should get this form about 3-7 weeks  before the end of your accounting period.

Never ignore a demand from HMRC for any kind of tax return, whether for a company or yourself. Even if you’re sure it’s been sent by mistake, you and your business can still be hit with fines and penalties if you miss a filing or payment deadline.

Limited Company Tax Returns

What are the pros and cons of a limited company?

A lot of self-employed people choose to set up Limited Companies.

Pros:

  • They limit the amount of money you stand to lose if it all goes wrong.
  • They can lower your personal tax bill.
  • There's also a certain prestige that goes along with setting up this way. It's a sign that you're taking your business seriously, which can help when you need to impress lenders or customers.

On the other hand...

Cons:

  • You're giving up some privacy.
  • There's set-up costs.
  • You're also bulking up your bookkeeping workload. For example, since your company's money isn't strictly "yours", you have to make separate tax returns for it from your own.

Limited Company Tax Returns

I'm a Limited Company director. What records do I need to keep?

There's a lot of paperwork involved in being a company director, or even just an employee. You should obviously keep all your P45, P60 and P11D documents, but that's not all. Taxed award schemes, redundancy payments and a whole range of benefits all come with records to hold onto. You should also remember to keep track of any essential expenses you've had. You might be able to use them to bring down the tax you owe.

HMRC will expect you to tell them about any benefits you've received, whether that's Jobseeker's Allowance, Sick Pay or Statutory Maternity Pay. You should also record any income or other benefits you've had from things like employee share schemes. It's all part of the big-picture overview of your finances that the taxman wants to see.

Company Tax

What kinds of tax returns need filing?

A Limited Company has to file a few different kinds of paperwork to stay in business. One of the most obvious is your Company Tax Return. This is how your Corporation Tax is worked out, and mostly has to do with the profits or losses you made.

One thing to keep in mind is that this is separate from your annual return or "confirmation statement".  An annual statement is a yearly check that all the conformation Companies House holds about your company is correct.

Finally, you'll need to file your personal Self Assessment tax return as a director of the company. Self Assessment returns work out how much tax you owe personally, and again are separate from your company's return. Self Assessment is a huge topic, and often leads to people paying too much tax and requiring a tax refund.

Limited Company Tax Returns

Do I need to register for self assessment?

Running a Limited Company means submitting a lot of paperwork to HMRC and Companies House. As part of this, directors have to submit annual Self Assessment tax returns. The Self Assessment system has a lot of twists and turns, and tends to trip up people who aren't used to it. If you're at all unsure of your footing, it's best to call RIFT for professional advice.

Limited Company Tax Returns

Can I get help with my tax returns?

Absolutely! RIFT are the UK's leading tax experts. We can advise on your business' set-up, or even act as your official agent with HMRC. What's more, our specialist tax return service can solve all your personal and company tax return problems. We'll save you money and keep you on the right side of HMRC. Get in touch to see how we can help.

CIS and your limited company

How does CIS work if I run a Limited Company?

The Construction Industry Scheme (CIS) is designed to take tax payments in advance from self-employed people in the building trade. When you’re a contractor, you carve off a chunk of money from your subcontractors’ pay and send it directly to HMRC. That hacked-off chunk is usually 20% - but only if your subbies are registered for CIS. If they aren’t, the deduction rockets up to 30%!

When you’re a subcontractor running a Limited Company of your own, the deductions your contractors make can be used to bring down the Corporation Tax you owe. Alternatively, you might just be able to get it refunded by the taxman.

Construction Industry Scheme

What if my Limited Company's paying subcontractors?

When you’re a contractor with subbies to pay, you have to send a regular report to HMRC about all the CIS deductions you’ve taken from their earnings. You do this on a monthly schedule. It makes no difference if your subcontractors are individual people or companies themselves. It’s just another way of taking tax out of their pay, the same as you would via PAYE.

Limited Company tax returns

What if my limited company is just a subcontractor?

If your company’s doing work for a contractor, and you aren’t using subbies, the contractor will handle your CIS deductions. If you’re registered for CIS, you’ll lose 20% of your pay to the taxman. If not, it’ll be 30%. You might be able to apply for gross payment status, where no CIS deductions are made. Things can get sticky there, though, so you need to know what you’re doing.

You’ll report the amount taken out via CIS in your Employment Payment Summaries to HMRC. At the end of the tax year, there’ll be an online form to fill in on the government website. HMRC uses those figures to work out how much to knock your Corporation Tax bill down by. If you end up in credit, you’ll get a tax refund.

Limited Company tax returns

My Limited Company’s working for a contractor, but I’m also paying other subcontractors

If your company’s using subcontractors, but is doing work for another contractor, then your situation’s a little more complex. Your contractor will still make CIS deductions before paying you, as normal. You’ll then take CIS payments out of your subbies’ pay. The amount you end up sending to HMRC depends on which is higher – the amount the contractor took from your pay or what you’ve taken from your subcontractors’. If you end up losing more in your own CIS payments than you’re taking from your subbies’ cash, then your Corporation Tax bill comes down to settle up. If it’s the other way around, you’ll end up owing HMRC money.
If it sounds fiddly, that’s because it really is. Getting CIS wrong can mean a ton of headaches from the taxman. That’s why it’s so important to get professional help. Talk to RIFT about keeping your CIS situation under control. If you’re earning over £30,000, ask about our specialist RIFT Accounting service for builders.

Paying yourself

How do I pay myself from a limited company?

As the director of a company, you have some flexibility in how you pay yourself. For example:

  • You could take all your pay a simple salary, and pay your Income Tax and National Insurance Contributions through the Pay As You Earn (PAYE) system. Some of the day-to-day personal expenses of doing your job may qualify you to claim a yearly PAYE tax rebate from HMRC.
  • Shareholders in a company (and many small and medium-sized businesses only have one of these) can have dividends paid to them based on the proportion of the company they own. Many company owners choose to pay themselves at least partly in share dividends, which are taxed differently from PAYE salaries (see below).

Paying yourself

What tax do I pay on company dividends?

Company share dividend payments are taxed through their own system, with its own rates and thresholds. As with other kinds of income, you won’t pay any tax on these payments if they’re within your tax-free Personal Allowance. After that, you get a “dividend allowance” of £2,000 (as of the 2022/23 tax year) which also won’t be taxed.

Any dividend payments over your dividend allowance will be taxed based on the Income Tax band they fall into:

  • Basic rate: 8.75% tax
  • Higher rate: 33.75% tax
  • Additional rate: 39.35% tax

As you can see, the tax rates for company share dividends are lower than the standard PAYE tax bands. That’s why paying yourself partly through dividends is generally seen as “tax efficient”.

Guarantee

RIFT Guarantee

The unique RIFT Guarantee means you'll never have to worry about the taxman reclaiming any of your tax rebate. So long as you give us full, accurate information for your claim, if HMRC disagrees with your pay-out and demands some back, we'll pay it from our pocket instead of yours. It won't cost you a penny!

RIFT Guarantee

Need more help?

Wondering if you can claim a tax refund or need to submit a tax return? Use our online tools to find out if you're owed money by HMRC.

Do I Qualify?

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