Limited Company Tax

A guide to the limited company tax rates

Limited Company Tax obligations

While running a Limited Company offers many benefits, it comes with tax obligations too. We’ve set out your main contractor tax liabilities below.

Dividend Tax and your Limited Company

With a Limited Company, the most tax efficient way of withdrawing your profits it to take a low salary and the rest in dividends. A dividend is a share of a Limited Company’s post-tax profits. When dividends are paid, all shareholders receive them at the same time and the amount each person receives is based on the percentage of shares held.

Dividend income tax rates are lower than normal income tax rates for higher or additional rate taxpayers. Here’s how the rates compare:

Tax Band

Dividend income tax rate

Salary income tax rate

Basic Rate (and non taxpayers)0%20% (over £10,600)
Higher Rate25%40%
Additional Rate30.56%45%

Corporation tax

Any profit your Limited Company makes will be subject to corporation tax. You’ll need to submit a limited company tax return to HMRC using the online form CT600 for every year you trade. You’ll be responsible for submitting the correct figures and paying any corporation tax owed by the due date.

The UK corporation tax rate for 2015/16 is 20%. Tax credits of 10% are allowable for dividends paid out.

Other Limited Company tax obligations

Your Limited Company tax liabilities could also include PAYE and VAT.

PAYE payments are the tax and National Insurance deductions you make from salary payments (including your own). You need to report these to HMRC through the RTI (Real Time Information) system.

If you’re VAT registered, you’ll need to complete an online VAT return every three months and make any VAT payments to HMRC by the relevant due date.

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Remember, when you choose Boox, we’ll help you ensure you never miss a tax deadline or fall short of what you owe – when you owe it.

It’s all taken care of by our accounting app and your dedicated accountant who is there to advise you at any time about your business finances.