VAT & Companies
Corporation Tax (2025/26)#
| Profit Band | Rate |
|---|---|
| Up to £50,000 | 19% (small profits) |
| £50,001 - £250,000 | Marginal relief |
| Over £250,000 | 25% (main rate) |
Marginal Relief Formula#
For profits between £50,000 and £250,000:
Marginal Relief = (Upper Limit - Profits) × Profits/Profits × 3/200
Effective Rate = Between 19% and 25%VAT Registration#
| Threshold | Amount |
|---|---|
| Compulsory registration | Over £90,000 (rolling 12 months) |
| Voluntary registration | Any turnover |
| De-registration | Below £88,000 |
VAT Schemes#
| Scheme | Best For |
|---|---|
| Standard | Most businesses, claim input VAT |
| Flat Rate | Small businesses, simplified % of turnover |
| Cash Accounting | Cash-flow sensitive businesses |
| Annual Accounting | Predictable VAT, one annual return |
Standard VAT Rates#
| Rate | Percentage | Examples |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Home energy, car seats |
| Zero-rated | 0% | Food, books, children's clothes |
| Exempt | N/A | Insurance, education, health |
Companies House#
Annual Filings#
| Filing | Deadline | Fee |
|---|---|---|
| Confirmation Statement (CS01) | Every 12 months from incorporation | £34 (online) |
| Annual Accounts | 9 months after year-end | Free (online) |
| Corporation Tax Return (CT600) | 12 months after year-end | N/A |
Company Types#
| Type | Liability | Tax |
|---|---|---|
| Sole Trader | Unlimited personal | Income Tax + NIC |
| Partnership | Unlimited shared | Income Tax + NIC each |
| LLP | Limited to capital | Income Tax + NIC each |
| Ltd Company | Limited to shares | Corporation Tax |
Director Salary Optimisation#
For Ltd companies, optimise the salary/dividend split:
| Component | Tax Implications |
|---|---|
| Salary up to £12,570 | 0% income tax, 0% employee NI, 13.8% employer NI |
| Salary £12,570 - £50,270 | 20% income tax + 8% employee NI + 13.8% employer NI |
| Dividends up to £1,000 | 0% (dividend allowance) |
| Dividends (basic rate) | 8.75% |
| Dividends (higher rate) | 33.75% |
| Dividends (additional) | 39.35% |
The optimal salary is typically set at the NI Secondary Threshold (£9,100 for 2025/26) to qualify for state pension credits without triggering employer NI.
Corporation Tax (CT600)#
The CT600 is the annual Corporation Tax return that every UK limited company must file with HMRC. It reports the company's taxable profits, capital allowances, losses, and the Corporation Tax due.
Filing deadline: 12 months after the end of the accounting period. Payment deadline: 9 months and 1 day after the end of the accounting period.
Key Box Reference#
| Box | Description |
|---|---|
| 145 | Total turnover from trade |
| 155 | Trading profits |
| 315 | Taxable total profits |
| 430 | Corporation Tax |
| 435 | Marginal relief |
| 440 | Corporation Tax chargeable |
| 528 | Tax payable (self-assessment) |
Capital Allowance Rates#
| Allowance | Rate | Notes |
|---|---|---|
| Annual Investment Allowance (AIA) | 100% | Up to £1,000,000 per year |
| Full expensing | 100% | Main rate plant & machinery (new assets) |
| Writing Down Allowance (WDA) - main pool | 18% | Reducing balance |
| Writing Down Allowance (WDA) - special rate | 6% | Integral features, long-life assets |
| Structures & Buildings Allowance (SBA) | 3% | Straight-line over 33⅓ years |
Corporation Tax Rates (2025/26)#
| Band | Rate | Profit Range |
|---|---|---|
| Small profits rate | 19% | £0 - £50,000 |
| Main rate | 25% | Over £250,000 |
| Marginal relief fraction | 3/200 | £50,001 - £250,000 |
Loss Relief#
| Relief | Reference | Detail |
|---|---|---|
| Current year | S37 CTA 2010 | Set against total profits of the same period |
| Carry-back | S37(3)(b) | Carry back 12 months to the preceding period |
| Carry-forward | S45 CTA 2010 | Carry forward indefinitely against future trading profits |
R&D Tax Relief#
TaxMTD supports Research & Development and Creative Industries tax relief claims directly within the CT600 workflow:
- SME R&D relief and R&D Intensive SME enhanced support (merged scheme from April 2024)
- RDEC (R&D Expenditure Credit) for large companies
- Qualifying expenditure tracking (staff costs, consumables, software, subcontracted R&D)
- Enhanced expenditure calculation with automatic uplift rates
- Creative industries relief (film, TV, video games, animation, theatre, orchestra)
- CT600L supplementary page support with notification and additional info form tracking
Qualifying Capital Expenditure#
Breakdown of qualifying expenditure by asset category:
| Category | Box | Description |
|---|---|---|
| First year allowance | 760 | Zero-emission cars, water-efficient equipment |
| Environmentally friendly | 765 | ECA-qualifying from Energy/Water Technology Lists |
| Long-life & integral features | 770 | Assets with >25yr life, lifts, heating, electrical |
| Structures & buildings | 771 | Non-residential SBA at 3% over 33.3 years |
| Full expensing | 772 | New main-rate plant & machinery (100%) |
| Other machinery | 775 | General plant & machinery (main/special rate pool) |
TaxMTD supports full CT600 filing with complete tax calculation chain, R&D/creative relief, all supplementary page checkboxes, auto-fill from your accounts, capital allowance computation, marginal relief calculation, straddling period support, and iXBRL tagging. Available once you've signed in and set up a limited-company entity.
Anti-Avoidance: IR35#
If you contract through a limited company, IR35 may apply:
| Factor | Inside IR35 | Outside IR35 |
|---|---|---|
| Control | Client controls how/when | You decide |
| Substitution | Must attend personally | Can send substitute |
| Mutuality | Ongoing obligation | Project basis |
| Equipment | Client provides | You provide |
| Financial risk | None | Bear own risk |
If IR35 applies, you're taxed as an employee. The end client is responsible for determining status (public sector) or the fee-payer (private sector).