Operating a business as a company in the UK can be quite lucrative. However, you’ll need to handle the taxation complexities of owning a company. There has been a growing trend of businesses hiring external chartered accountants and business advisors who can help them with tax planning, filing and other financial issues.

Companies come under more scrutiny than others due to their complex tax structures. It is easy to get overwhelmed by the various rules and regulations a business must adhere to regarding compliance and taxation. Hiring an experienced and qualified accountant will put you in a good position because they’ll ensure your taxes are accurately calculated and filed within the stipulated deadline.

However, you should know about all the taxes applicable to a business operating as a company in the UK. This comprehensive guide will introduce you to the world of company taxes.

Profit Tax

You’re subject to a corporation or profit tax if you earn profit through your business operations and other activities. The tax rate currently stands at 19% but is due to increase to 25% by April 2023 for companies earning a profit above the £50,000 threshold. HMRC intends to provide some relief for companies earning between £50,000 and £250,000.

Corporation tax payments are to be paid in four equal instalments. HMRC is strict about timely tax payments, and you can be penalised for not paying your dues on time. If you earn more than £1.5 million, you must pay your profits in the seventh and tenth months of the current accounting period. The other two instalments are due in the first and fourth months after the end of the accounting period.

paper coming out of a machine.

If your company is turning over profits of more than £20 million annually, you must pay your taxes in the third, sixth, ninth and twelfth month of the current accounting period.

Calculating the amount of tax to be paid can be a headache. Working with a chartered accountant will ensure that all calculations are accurate. They will also help you reduce your tax bill through allowances and deductions.


Losses can be offset against profits and gains. You can also carry forward losses from prior or future accounting periods to offset them against profits. However, you need to follow specific rules and requirements to offset your capital losses. Therefore, you need to work with an experienced accountant to ensure everything is done correctly. If you own a group of companies, you can also offset losses from one group against another. Work with an accountant to determine your losses and understand how to offset them against your gains.


Subject to specific rules and requirements, interest paid by a UK company is tax-deductible. It is advised to work with an accountant around the rules surrounding interest payments and how they can be used to lower your tax bill. One rule limits the ability to deduct net interest expense to 30% of the company’s or group’s earnings before interest, tax, depreciation, and amortisation (EBIDTA). However, the rule only applies to groups or companies with more than £2 million in interest expenses.

a person stacking coins.

R&D Expenditure

You can also get tax relief if you undergo qualified research and development (R&D) expenditure. Several conditions must be fulfilled to determine the amount of relief you can receive. If you’re an SME, you’re entitled to receive tax relief in aggregate at 230%. Large companies undergoing research and development can claim an ‘above the line’ credit. The amount is calculated in proportion to the company’s R&D expenditure. The credit is recorded as a deduction in the cost of R&D. The whole process can be pretty confusing, and it is better to work with an accountant to determine the R&D expenditure you can claim as a deduction.

Goodwill and IP

There is a possibility that you can get tax relief for your intangible assets. Even though the relief is limited, it is worth checking out if you qualify for the criteria of receiving relief on intangibles such as goodwill and intellectual property. Again, consult an experienced chartered tax adviser who can guide you with tax reliefs on intangible assets.

an aerial view of a person using a laptop.


Royalty payments are also tax-deductible if they don’t exceed the predefined market rate. Companies operating in the UK must deduct tax at the basic rate of 20% from certain royalty payments made to non-UK individuals. Tax must be deducted on payments made for trademarks, brand names, design rights, patent royalties, and more.


You must undertake the Pay As You Earn (PAYE) scheme if you have employees on your payroll. PAYE is used to collect income tax and National Insurance Contributions (NICs). UK companies are obligated to operate PAYE and make monthly contributions to the HMRC of the PAYE deducted from employees. Working with a professional accountant who can help you operate PAYE correctly is essential. Any errors or omissions can lead to trouble with the HMRC.

When deducting taxes, you should remember that income tax is payable at three rates. The basic rate stands at 20%, the higher rate is 40%, and the additional rate is 45%. National Insurance Contributions are paid 12% of earnings between the primary and upper threshold. Any benefits provided to employees or directors of the company are to be notified to HMRC. These benefits include accommodation, cars, private medical insurance, and more.

an old cash register.


Value Added Tax is paid on the provision of goods and services in the UK through a taxable entity. The standard rate of VAT currently sits at 20%. However, certain goods are exempt from VAT. A business that has provided supplies amounting to more than£85,000 in the past 12 months or forecasts making supplies above the amount mentioned in the next 30 days must register for VAT and supply all information to HMRC.


Depreciation on fixed assets is disallowed when dealing with corporation tax. Instead, companies are allowed fixed writing down capital allowance on certain capital expenses. Also, an annual investment allowance (AIA) is provided to companies that provide them with full tax relief on expenditures related to specific plants and machinery. Depreciation for taxation purposes can be confusing, and you need an expert accountant’s help to clarify any confusion. These experts can deal with all depreciation issues and work to reduce your tax bill!

Employment-Related Shares

If any employee or director in the company intends to buy shares in the company at less than the actual market value, they must pay income tax on the difference between price paid and the actual market value of the shares. NICs will also get the same treatment. Further taxation might be applicable if the shares have some special conditions attached.

a person singing on papers

Share Options

We’re seeing a rise in employee stock options schemes where companies look to attract the best talent by incentivising them to have a shareholding in the business. The organisation will provide the right to acquire shares in the future for a fixed price. These are often conditional on meeting certain performance targets. Taxes may be applicable if shares are acquired below market value. However, there are certain options that do receive beneficial tax treatment.

Capital Gains Tax

This is another area of taxation that can get highly confusing. All gains on the disposal of assets are subject to a capital gains tax at a fixed rate. Regardless of the type of asset or the ownership duration, you’re required to pay an introductory tax rate of 10% on any capital gains incurred. The percentage increases to 20% for higher rate taxpayers. If you have made a gain on the sale of a residential property, you’d need to pay 18% CGT if you are a basic rate income taxpayer and 28% if you are a higher-income taxpayer.

a red neon light saying tax.

You can get the business asset disposal relief as a business owner if you fulfil a certain criterion. The scheme can reduce your CGT rate to 10% on the disposal of any shares or assets used in the business. The main conditions are as follows:

  • The company in question is a trading company of the holding organisation of a particular trading group
  • The individual is an employee of the company
  • The employee has at least 5% share capital and voting rights in the company.
  • The employee is entitled to receive at least 5% of the disposal proceeds or the profits generated by the company.

External investors who have put their money in the company are entitled to get CGT relief on share sales. However, the relief is also subject to the fulfilment of certain conditions. Investors can only get relief if they are not employees of the company or if any person acting on their behalf is an employee of the company. The relief amounts to 10% and has a £10 million limit.

Why Hire an Accountant for Filing Taxes?

Calculating and filing taxes with HMRC can be quite stressful and time-consuming. There is a greater chance of making significant errors if you don’t get the help of an experienced accountant. Things can get bad to worse if you have a complicated tax structure.

Businesses looking to save money might decide to file taxes themselves. However, the decision can backfire if you make significant errors on your returns. Therefore, hiring an experienced tax accountant can be quite beneficial as they will guide you in filing your returns.

a calculator on a phone sitting on top of a red notebook.

It can be hard to keep track of all the taxes applicable to your business operations. A qualified chartered accountant will take care of all your financial and taxation matters, giving you the peace of mind to focus on other pressing areas of your business. They will help you navigate the complexities, help you legally maximise the reliefs you are eligible to claim, and ensure that the whole process is efficient and smooth.

Any significant errors can lead to HMRC audits which can bring a lot of stress and additional workload. An external accountant will ensure an error-free filing process and minimises the chances of an HMRC audit. Another significant benefit of hiring external tax advisers is that they bring a level of expertise and organisation that isn’t found elsewhere. Their experience will flow through your company’s financials, and you’d see a more streamlined and structured workflow.

They will communicate and provide expert advice on all your financial matters. Their expertise will help you understand complex taxation issues and ensure that your business is compliant with relevant rules and regulations. There is no better feeling than knowing that your business’s financial health is safe and secure.

Get Started with IBISS & CO

Companies often struggle to find high-quality, experienced tax advisers with the necessary knowledge and experience in dealing with complicated taxation matters. Most businesses choose to develop an in-house taxation set-up which can be pretty expensive. However, if you decide to look externally, you can’t look past the services provided by IBISS & CO.

We have firmly established ourselves as one of the leading personal tax advisors in the UK. We have recently expanded to Walsall, aiming to help the local business community with their complex taxation needs. Our team of expert chartered accounts and business advisors in the UK is highly qualified and has worked with some of the biggest businesses in the country. They have considerable experience in dealing with complex tax and accounting matters.

We always strive hard to help our clients achieve their financial goals. We provide unbiased opinions and work in the best interest of your business. Our inventive ways to legally reduce your tax amount have enabled us to become the go-to accounting and tax consultants in Walsall.

We are also experienced in providing high-quality self-assessment tax return services to individuals seeking help with their tax issues. Our experts can also help with other areas of taxation, such as landlord self-assessment tax returns. We are also well-versed in providing quality inheritance tax planning services, non-resident landlord self-assessment, and other issues. Contact us today for more information.

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