Comprehensive Guide to UK Business Tax 2025

Compliant and effective management of your business tax obligations will help you avoid hefty fines and penalties and provide a stable foundation for your organisation’s financial health.

This comprehensive guide aims to demystify the various business taxes in the UK. From Corporation Tax to the Construction Industry Scheme (CIS) and from Capital Gains Tax to Value Added Tax (VAT), we cover the essentials to help you manage your business finances effectively to support compliant and profitable operations.

 

Section A: Company Tax Return Overview

 

Every incorporated business in the UK must submit an annual company tax return to HM Revenue and Customs (HMRC). The return provides a detailed account of the company’s income, expenses and profits, ensuring that the correct amount of Corporation Tax is paid.

 

1. What is a Company Tax Return?

 

A company tax return, officially known as the CT600 form, is a comprehensive report that details a company’s financial activities over its accounting period. This document includes information about the company’s income, deductions, and tax reliefs, which collectively determine the Corporation Tax owed to HMRC. The return also provides a summary of any trading losses and capital allowances that the company wishes to claim.

The CT600 form must be accompanied by the company’s statutory accounts, which include the balance sheet, profit and loss account, and other relevant financial statements. These accounts provide a transparent view of the company’s financial health and form the basis for the tax calculations reported in the return.

Late submission or incorrect information can lead to penalties and interest charges. Accurate and timely submission helps avoid these additional costs and keeps the company in good standing with HMRC.

You can read our comprehensive guide to Tax Returns here >>

You can read our comprehensive guide to the CT600 Form here >>

 

2. Who Has to File with HMRC?

 

All UK-incorporated companies must file a Corporation Tax return (CT600) with HMRC, even if they have made a loss or no Corporation Tax is due. This includes:

 

a. Limited companies: The most common type of incorporated business, required to file a CT600 and pay Corporation Tax on their taxable profits.

b. Certain unincorporated organisations: Clubs, co-operatives, and associations that are subject to Corporation Tax.

 

Other business structures do not file a CT600 but have separate filing obligations with HMRC:

 

a. Partnerships: Must file a partnership tax return, and each partner must declare their share of the profits on their individual Self Assessment return.

b. Sole traders: Must file a Self Assessment return declaring business income and allowable expenses.

c. Limited Liability Partnerships (LLPs): File partnership tax returns, and each member completes a Self Assessment return for their share of profits.

 

Other entities may also have filing obligations depending on their circumstances:

 

a. Trusts: May need to submit tax returns depending on the type of trust and income.

b. Charities and non-profits: While often exempt from Corporation Tax, they may still need to file returns for certain income, VAT, or PAYE.

 

Since filing requirements depend on the business structure, turnover, and nature of activities, companies and organisations should confirm their obligations with a qualified accountant or tax adviser.

 

3. Legal Requirements

 

Submitting a company tax return is a legal obligation for all UK-incorporated companies, regardless of whether they have made a profit or not. To comply with the requirements, companies must:

 

a. Register for Corporation Tax: Upon incorporation, a company must register for Corporation Tax with HMRC. This should be done within three months of starting business activities.

You can read our comprehensive guide to Registering for Corporation Tax here >>

 

b. Keep Accurate Records: Detailed and accurate records of all financial transactions must be maintained. These records support the figures reported in the tax return and are essential in case of an HMRC audit.

 

c. Submit Annual Tax Returns: A company must file its tax return annually within 12 months of the end of its accounting period.

 

d. Pay Corporation Tax: The tax due must be paid within nine months and one day after the end of the accounting period, even if the company tax return is filed later. Companies with annual taxable profits over £1.5 million (subject to group company adjustments) may need to pay in quarterly instalments.

You can read our comprehensive guide to Pay Corporation Tax here >>

You can read our comprehensive guide to Tax Returns here >>

 

 

Section B: Filing Accounts and Company Tax Returns

 

Company tax returns and accounts must be filed to provide HMRC and Companies House with a detailed insight into the company’s financial health and tax liabilities.

 

1. How to File Accounts and Company Tax Returns

 

Accurate and timely filing of accounts and company tax returns forms part of good business management and is mandatory to avoid penalties.

 

a. Prepare Financial Statements
The preparation of financial statements begins with the balance sheet, which offers a snapshot of the company’s financial position at the end of the accounting period, detailing assets, liabilities, and equity. Alongside this, the profit and loss account summarises the company’s revenues, costs, and expenses during the accounting period, showing the profit or loss made. Supporting documents, including detailed records of all financial transactions, such as invoices, receipts, bank statements, and payroll records, are also essential.

 

b. Complete the Statutory Accounts
Annual accounts must be prepared in compliance with UK Generally Accepted Accounting Practice (GAAP) or International Financial Reporting Standards (IFRS) for larger companies. This includes a Directors’ Report, which is a narrative from the company’s directors outlining the company’s performance and key activities during the financial year. Additionally, notes to the accounts provide context and further details to the figures presented in the financial statements.

 

c. Submit Accounts to Companies House
Accounts can be submitted to Companies House using their online service, which requires the company authentication code for access. Alternatively, paper copies can be submitted by post, although online filing is faster and more secure. Deadlines for submission vary: private limited companies must file their accounts within nine months of the end of their accounting period, whereas public limited companies have six months. First accounts have longer deadlines (21 months from incorporation for private companies and 18 months for public companies).

 

d. Prepare the Company Tax Return (CT600)
The CT600 form must be completed, detailing the company’s income, expenses, tax reliefs, and any tax payable. The statutory accounts prepared for Companies House should be included with the CT600 form. Detailed calculations of Corporation Tax liability, based on the figures in the financial statements, are also necessary.

 

e. Submit the Company Tax Return to HMRC
Registration for HMRC’s online services is required to file the CT600 form electronically, which is the required method in most cases. Paper returns are only accepted in limited circumstances. The company tax return must be submitted within 12 months of the end of the accounting period. For instance, if the accounting period ends on 31 March 2024, the tax return is due by 31 March 2025.

 

f. Pay Corporation Tax
Corporation Tax must be paid within nine months and one day after the end of the accounting period. Following the previous example, if the period ends on 31 March 2024, the tax payment is due by 1 January 2025. Payments can be made via direct debit, bank transfer, or through HMRC’s online payment service. Large companies with annual taxable profits above £1.5 million may need to pay in quarterly instalments, ensuring tax is settled throughout the year rather than in a single payment.

 

2. Key Deadlines and Penalties for Late Filing

 

Statutory accounts for private companies are due within nine months of the end of the accounting period, while public companies have a six-month deadline. The company tax return must be submitted within 12 months of the end of the accounting period. For Corporation Tax payments, the deadline is nine months and one day after the end of the accounting period (unless quarterly instalments apply).

 

Penalties for late filing of accounts with Companies House escalate based on the delay. A delay of up to one month by a private company incurs a £150 penalty. Delays of one to three months result in a £375 penalty. For delays of three to six months, the penalty increases to £750. A delay of more than six months attracts a £1,500 penalty. Penalties for public companies are larger: £750 penalty for filing up to one month late, £3,750 penalty for filing between one and six months late, and £7,500 penalty for filing more than six months late.

 

HMRC imposes a £100 penalty for company tax returns filed one day late. An additional £100 penalty is levied if the return is three months late. At six months, HMRC estimates the unpaid Corporation Tax and adds a penalty of 10% of this amount. A further delay to 12 months results in an additional 10% penalty on the unpaid tax. Interest is charged on the outstanding amount from the due date until full payment is made. Prolonged delays may also result in potential surcharges or additional penalties.

 

Tax Type	Filing Deadline
Corporation Tax Return (CT600)	12 months after accounting period end
Corporation Tax Payment	9 months + 1 day after accounting period end (unless quarterly instalments apply)
VAT Return	1 month and 7 days after VAT period end
PAYE Reporting	On or before employee payday (via RTI)
Self-Assessment Tax Return (Online)	31 January following tax year end
Self-Assessment Tax Return (Paper)	31 October following tax year end

 

 

Section C: Accounts and Tax Returns for Private Limited Companies

 

Private limited companies in the UK must adhere to specific legal and financial requirements to ensure compliance with HMRC and Companies House. These requirements include preparing and filing accurate accounts and tax returns, which provide a transparent record of the company’s financial activities and tax liabilities.

 

1. Requirements for Private Limited Companies

 

Private limited companies must prepare statutory accounts every financial year. These accounts must comply with UK Generally Accepted Accounting Practice (GAAP) or International Financial Reporting Standards (IFRS) if applicable. The components of statutory accounts include a balance sheet, which summarises the company’s financial position, including assets, liabilities, and shareholders’ equity. Additionally, the profit and loss account provides a detailed report of the company’s income, expenses, and profits or losses over the financial year.

The Directors’ Report offers a narrative outlining the company’s performance and activities during the year, while notes to the accounts provide further explanations and details about the figures presented in the financial statements.

Private limited companies must file their annual accounts with Companies House within nine months of the end of their financial year. Accounts can be filed online or via paper submission, though online filing is preferred for its speed and security.

The CT600 form details the company’s income, expenses, and tax computations and must be completed and submitted to HMRC along with the statutory accounts. The tax return must be accompanied by the company’s statutory accounts and any other relevant financial documents.

The company tax return must be filed within 12 months of the end of the financial year. Companies are required to file their tax returns online using HMRC’s digital services.

Corporation Tax must be paid within nine months and one day after the end of the financial year. Payments can be made via direct debit, bank transfer, or HMRC’s online payment system. Larger companies with profits above £1.5 million (adjusted for the number of associated companies) are required to make Corporation Tax payments by quarterly instalments.

 

2. Differences from Other Types of Business Structures

 

The requirements for private limited companies differ from other types of business structures in various ways:

 

a. Sole Traders
The legal status of sole traders differs significantly from private limited companies, as sole traders are not separate legal entities from their owners. This means the owner is personally responsible for all business debts and liabilities. Instead of a company tax return, sole traders must complete a Self Assessment tax return, which includes reporting all business income and allowable expenses. While statutory accounts are not required to be filed with Companies House, sole traders must maintain accurate records for their tax returns.

 

b. Partnerships
Partnerships, like sole traders, are not separate legal entities, with partners sharing responsibility for the business’s debts and liabilities. Partnerships must submit a partnership tax return, and each partner is required to file a Self Assessment tax return for their share of the profits. Although partnerships do not need to file statutory accounts with Companies House, they must keep accurate records for tax purposes.

 

c. Public Limited Companies (PLCs)
Public limited companies (PLCs) share the characteristic of being separate legal entities with private limited companies, but they can offer shares to the public and are subject to stricter regulatory requirements. PLCs must prepare more detailed statutory accounts, which are filed within six months of the end of the financial year (or 18 months for their first accounts). These accounts are more complex and include additional disclosures. Similar to private limited companies, PLCs must file a company tax return (CT600) and pay Corporation Tax, with large PLCs often being required to make payments by quarterly instalments.

 

d. Limited Liability Partnerships (LLPs)
Limited Liability Partnerships (LLPs) combine elements of partnerships and limited companies, providing limited liability to partners while maintaining flexible management structures. LLPs are required to file annual accounts with Companies House and prepare accounts in accordance with UK GAAP or IFRS. They submit a partnership tax return, and individual partners report their share of profits on their Self Assessment tax returns.

 

 

Section D: Limited Company’s First Accounts and Company Tax Return

 

Starting a limited company in the UK involves several crucial steps, including preparing and filing your first set of accounts and company tax return. This process can be particularly challenging for newly established companies due to the various legal requirements and deadlines involved.

 

1. Key Considerations for Newly Established Companies

 

Proper planning and attention to detail will help ensure compliance with legal obligations and set a solid foundation for the company’s financial management. These include areas such as:

 

a. Initial Accounting Period
Upon incorporation, a company’s first accounting period is automatically set by Companies House and HM Revenue and Customs (HMRC). Typically, this period ends on the last day of the month of the first anniversary of the company’s incorporation. For example, a company incorporated on 15 March 2024 will have its first accounting period ending on 31 March 2025.

If necessary, the accounting reference date can be changed to better align with the business cycle, although there are restrictions on how often this can be done.

 

b. Preparing the First Statutory Accounts
The first statutory accounts will include a balance sheet, a profit and loss account, and notes to the accounts. These documents provide a snapshot of the company’s financial health and performance over its first accounting period.

The first set of accounts must be filed within:
– **21 months of incorporation** for private limited companies.
– **18 months of incorporation** for public limited companies.

For example, a company incorporated on 15 March 2024 must file its first private company accounts by 15 December 2025.

 

c. Corporation Tax Registration
Within three months of starting business activities, a company must register for Corporation Tax with HMRC to avoid penalties. Upon registration, HMRC will send an activation code to the registered office address, which is necessary to access HMRC’s online services.

 

d. Preparing the First Company Tax Return (CT600)
The CT600 form, detailing the company’s income, expenses, tax reliefs, and any tax payable, must be completed. Typically, the first tax period aligns with the first accounting period. However, if the accounting period exceeds 12 months, two tax returns will be required: one for the first 12 months and another for the remaining period.

 

e. Submitting the Company Tax Return
The company tax return must be filed within 12 months of the end of the first accounting period. For example, if the accounting period ends on 31 March 2025, the tax return is due by 31 March 2026. Using HMRC’s online services to file the return ensures quicker processing and confirmation of receipt.

 

f. Paying Corporation Tax
Corporation Tax must be paid within nine months and one day after the end of the first accounting period. For instance, if the accounting period ends on 31 March 2025, the tax payment is due by 1 January 2026. Payments can be made via direct debit, bank transfer, or HMRC’s online payment service.

Companies with taxable profits exceeding £1.5 million (adjusted for associated companies) may have to pay Corporation Tax in quarterly instalments, starting within the first six months of the accounting period.

 

2. Common Pitfalls for New Companies

 

a. Accurate Record-Keeping
Maintaining detailed records from the beginning is crucial for new companies. Detailed records of all financial transactions, including invoices, receipts, bank statements, and payroll records, are essential for preparing accurate accounts and tax returns. Utilising accounting software can greatly assist in managing financial records and streamlining the preparation of accounts and tax returns.

 

b. Understanding Deadlines
Awareness of key deadlines is critical to avoid penalties for late filing of accounts or tax returns. Setting reminders for important dates can help ensure timely submission. It is also important to double-check specific deadlines for the company’s first accounts and tax return, as they may differ from standard annual deadlines.

 

c. Avoiding Common Errors
Providing accurate information in accounts and tax returns is necessary to avoid delays, penalties, and additional scrutiny from HMRC. Ensuring that all required documents and supporting information are included with accounts and tax returns can prevent incomplete submissions, which can lead to complications.

 

d. Seeking Professional Advice
Hiring an accountant or tax advisor can be beneficial for preparing and filing accounts and tax returns. Professional advice can help ensure accuracy and compliance and enable companies to take advantage of available tax reliefs. Additionally, HMRC offers resources and guidance on their website and through their support services, which can be valuable tools for new companies.

 

 

Section E: Construction Industry Scheme (CIS) Overview

 

The Construction Industry Scheme (CIS) is a set of regulations established by HM Revenue and Customs (HMRC) in the UK to govern payments made by contractors to subcontractors in the construction industry. The main aim of the CIS is to ensure that subcontractors pay the correct amount of tax on their earnings.

 

1. Who Does the Scheme Apply to?

 

Businesses or organisations that pay subcontractors for construction work need to comply with the CIS, including property developers, local authorities, housing associations, and large construction companies.

Compliance with CIS also applies to businesses or individuals performing construction work for contractors, which includes sole traders, partnerships, companies, and self-employed workers.

The Construction Industry Scheme covers a range of tasks, including:
– Site preparation such as demolition and clearance.
– Building work such as bricklaying, roofing, and plastering.
– Alterations, repairs, and maintenance.
– Decorating and dismantling structures.

Certain activities are outside the scope of CIS (such as architecture, surveying, and carpet fitting). Businesses should check HMRC guidance to confirm whether their work falls within CIS.

 

2. How to Register and Comply with CIS Regulations

 

Contractors who pay subcontractors for construction work must register as contractors with HMRC.

Subcontractors performing construction work for a contractor must also register as subcontractors. If both roles apply, a business must register as both.

Contractors can register using HMRC’s online services or by calling the CIS helpline, providing details such as company name, business address, and Unique Taxpayer Reference (UTR). Subcontractors need to register online through HMRC’s website or contact the CIS helpline, providing their UTR, National Insurance number (if self-employed), and company details (if a limited company).

Contractors must verify the CIS status of subcontractors before making any payments. This verification can be done online or by calling the CIS helpline. HMRC will confirm whether the subcontractor is registered for CIS and the correct deduction rate (20% for registered subcontractors and 30% for unregistered).

Contractors are required to deduct the appropriate amount of CIS tax from payments to subcontractors — 20% for registered subcontractors and 30% for those not registered. Detailed records of all payments and deductions must be kept, and subcontractors should be provided with payment and deduction statements.

 

Monthly CIS returns (CIS300):
Contractors must submit a CIS return to HMRC by the **19th of each month** following the tax month. The return must detail all payments made to subcontractors and the amounts deducted.

– Penalties apply for late returns: £100 fixed penalty if one day late, escalating to £3,000 or more for persistent failure.
– Deductions withheld must be paid to HMRC by the 22nd of the month if paying electronically (19th if paying by cheque).

Subcontractors should receive monthly statements showing the gross amount paid, the cost of materials (if any), and the amount of CIS tax deducted.

At year-end, subcontractors use these monthly statements to reclaim deductions (if overpaid) or set them off against tax liabilities through their Self Assessment return (if self-employed) or their Corporation Tax return (if incorporated).

 

3. Common Pitfalls to Avoid

 

a. Failure to Register: Ensure both contractors and subcontractors register for CIS to avoid penalties and higher deduction rates.

b. Incorrect Deductions: Verify subcontractors correctly to apply the right deduction rates. Mistakes can result in underpayment or overpayment of taxes.

c. Late Filing and Payments: Submit CIS300 returns and payments on time to avoid penalties and interest charges. Set reminders for the 19th and 22nd of each month.

d. Poor Record-Keeping: Maintain accurate and detailed records of all transactions, deductions, and payments. Good records are essential for compliance and auditing purposes.

e. Communication Errors: Ensure subcontractors receive accurate monthly statements. Miscommunication can lead to disputes and compliance issues.

 

 

Section F: Corporation Tax

 

Corporation Tax is a tax imposed on the profits of limited companies and other organisations, including clubs, societies, associations, and certain unincorporated bodies in the UK.

The tax is calculated on the profits made by these entities from their business activities, including trading profits, investment income, and chargeable gains. Companies do not pay Capital Gains Tax — instead, chargeable gains are included within Corporation Tax.

 

1. Who Needs to Pay Corporation Tax?

 

All UK-registered limited companies are required to pay Corporation Tax on their taxable profits. This includes profits from trading, investments, and chargeable gains from selling or disposing of assets.

Foreign companies operating in the UK with branches or offices must also pay Corporation Tax on the profits generated from their UK activities.

Additionally, clubs, societies, associations, cooperatives, and other unincorporated bodies that engage in trading or business activities are subject to Corporation Tax on their profits.

 

2. How to Calculate Corporation Tax

 

To calculate a company’s Corporation Tax liability, you first need to identify its accounting period. This period typically aligns with the company’s financial year, providing a consistent timeline for financial reporting and tax calculations.

 

a. Calculating Taxable Profits
Taxable profits comprise several components. Trading profits are calculated by subtracting allowable business expenses from income generated through business activities. Investment profits include income from investments such as interest, less related expenses. Chargeable gains are profits from selling or disposing of assets (e.g. property, shares, equipment) after deducting purchase costs and improvement expenses.

 

b. Applying Reliefs and Allowances
Allowable reliefs and allowances can reduce taxable profits. These may include capital allowances, R&D tax relief, and losses carried forward from previous years.

 

c. Computing Taxable Total Profits
The taxable total profits are computed by summing the adjusted trading profits, investment profits, and chargeable gains after applying reliefs and allowances.

 

d. Applying the Corporation Tax Rate
For the 2023/24 and 2024/25 tax years, the Corporation Tax rates are:
– **19% small profits rate** – for companies with profits up to £50,000.
– **25% main rate** – for companies with profits over £250,000.
– **Marginal relief** – for profits between £50,000 and £250,000, giving a gradual increase between 19% and 25%.

These limits are divided by the number of associated companies.

 

3. Filing and Paying Corporation Tax

 

Once incorporated, companies must register for Corporation Tax with HMRC within three months of starting business activities.

 

a. Maintaining Accurate Records
Detailed and accurate records of all income, expenses, investments, and asset transactions are essential. Maintaining these records ensures accurate tax returns and compliance in the event of HMRC enquiries.

 

b. Preparing the Company Tax Return (CT600)
The CT600 form requires detailed information on the company’s income, expenses, tax reliefs, and overall tax liability. Statutory accounts and any supplementary pages required by HMRC must be attached.

 

c. Filing the Company Tax Return
The completed CT600 form and supporting documents must be filed online using HMRC’s Corporation Tax service. The deadline for submission is within 12 months of the end of the accounting period.

 

d. Paying Corporation Tax
Corporation Tax must be paid within nine months and one day after the end of the accounting period, unless the company is large enough to be required to pay by quarterly instalments. Payments can be made via direct debit, bank transfer, or HMRC’s online payment services.

 

Quarterly instalments: Companies with taxable profits above £1.5 million (adjusted for associated companies and accounting period length) must usually pay in quarterly instalments, beginning within six months and 13 days of the start of the accounting period.

 

4. Key Deadlines and Penalties

 

– Register for Corporation Tax: within three months of starting business activities.
– File company tax return (CT600): within 12 months of the end of the accounting period.
– Pay Corporation Tax: within nine months and one day of the end of the accounting period (unless quarterly instalments apply).

 

Penalties:
– Late filing of company tax return: £100 if up to one day late, another £100 if three months late.
– Six months late: HMRC estimates tax due and adds a penalty of 10% of unpaid tax.
– 12 months late: further 10% penalty of unpaid tax.
– Interest is charged on late payments.
– For persistent late filing, penalties increase (up to £500 for repeated late filings).

 

You can read our extensive guide to Corporation Tax here >>

Section G: Capital Allowances

 

Capital allowances are statutory reliefs that let businesses deduct qualifying capital expenditure from taxable profits. Relief is given through a range of mechanisms (AIA, writing down allowances, first-year allowances, full expensing, structures & buildings allowance, and research & development allowances). Choosing the right route depends on the asset, timing, and the business’s tax profile.

 

1. Types of Capital Allowances

 

a. Annual Investment Allowance (AIA)
AIA gives a 100% deduction for most plant and machinery (P&M) up to the AIA limit, which is £1,000,000. AIA is available to companies and unincorporated businesses. Business cars do not qualify for AIA. If you spend more than the AIA limit, the excess usually falls into the relevant pool for writing down allowances (see below). Where two or more companies are under common control, they share a single AIA and must agree how to allocate it across the group. Mixed partnerships and certain leasing scenarios have specific restrictions. Timing matters: entitlement is based on the contract/payment rules in the period of expenditure, and transitional adjustments may apply when limits change.

b. Writing Down Allowances (WDA)
WDA provides relief on a reducing-balance basis for expenditure that does not qualify for (or exceeds) AIA or first-year allowances. Most P&M goes to the main rate pool at 18% per year. Certain assets fall into the special rate pool at 6% per year, including integral features of buildings (e.g. electrical systems, lifts, heating/cooling), long-life assets, thermal insulation, and higher-emission cars. Single-asset pools and short-life asset elections can optimise outcomes where disposals are anticipated. Balancing charges/allowances can arise on disposal depending on pool position and prior claims.

c. 100% First-Year Allowances (FYA)
Specific assets qualify for a 100% FYA if new and unused. Key categories include: zero-emission (electric) cars, zero-emission goods vehicles, electric vehicle charge-point equipment, gas/hydrogen refuelling equipment, and qualifying P&M in Freeport or Investment Zone special tax sites (companies only). FYAs cannot be combined with AIA for the same expenditure, and normal anti-avoidance/leasing exclusions apply. If a 100% FYA is not claimed, the expenditure can instead fall into AIA or WDA as appropriate. Car rules remain distinct: cars never qualify for AIA or full expensing; only new zero-emission cars qualify for 100% FYA, while other cars go to main or special rate pools based on CO₂ thresholds and purchase date.

d. Full Expensing and 50% First-Year Allowance for Companies
For companies within the charge to Corporation Tax only, full expensing provides a permanent 100% first-year deduction for qualifying new and unused main-rate P&M. Special-rate expenditure by companies may qualify for a permanent 50% first-year allowance (with the balance entering the special rate pool). Cars are excluded. Assets for leasing are generally excluded (except “background” P&M within a leased building). Second-hand assets do not qualify for full expensing/50% FYA (though they may qualify for AIA or WDA). In practice, many SMEs will prioritise AIA (which can give 100% relief on both main and special rate items, including second-hand assets) before turning to full expensing/50% FYA where AIA is fully used or the profile is otherwise advantageous. Claims are made in the Company Tax Return (CT600), and disposal rules can trigger balancing charges reflecting prior first-year relief.

e. Structures and Buildings Allowance (SBA)
SBA gives a straight-line 3% annual deduction over 33⅓ years for qualifying costs of constructing or renovating non-residential structures and buildings (land and dwellings excluded). The allowance starts from first commercial use and follows the original cost on subsequent transfers via an “allowance statement”. Enhanced 10% SBA can apply in defined special tax sites. Fit-out P&M within a building is considered separately and may qualify for AIA/WDA instead of SBA.

f. Research & Development Allowances (RDA)
RDA gives a 100% first-year allowance for qualifying capital expenditure on R&D (e.g. laboratories, research facilities, and certain equipment). RDAs are distinct from the revenue-based R&D tax reliefs and are often valuable where significant capitalised R&D infrastructure is acquired. Land does not qualify; buildings may qualify to the extent of R&D facilities. Interaction with other capital allowances (e.g. SBA or AIA) must be checked to avoid double-claims and to select the most beneficial route.

 

2. How to Claim Capital Allowances

 

Eligibility & classification
Identify asset type, condition (new vs second-hand), and use (including any leasing) to determine whether AIA, full expensing/50% FYA (companies only), FYA, WDA, SBA, or RDA applies. For group structures and mixed activities, confirm AIA sharing and pooling. Apply the car-specific rules where relevant.

Record-keeping
Maintain invoices, contracts, delivery/commissioning evidence, and detailed fixed asset registers mapping items to pools, FYAs, SBA schedules, or R&D facilities. Keep “allowance statements” for SBA so entitlement transfers correctly on sale.

Compute and claim
Apply the chosen allowances to compute deductible amounts for the period. Companies claim via the CT600; unincorporated businesses claim through Self Assessment. Where full expensing/50% FYA is claimed, ensure exclusions (cars, leasing, second-hand) are respected and that any subsequent disposal is tracked for balancing charges. If AIA is insufficient, allocate residual expenditure to WDA pools or consider short-life asset treatment for likely near-term disposals.

Evidence for HMRC
Be prepared to demonstrate qualifying use, new/unused status for first-year allowances, site status for enhanced rates (e.g. Freeports/Investment Zones), and the capital-R&D nexus for RDAs. Ensure consistency between statutory accounts, fixed asset registers, and tax computations.

 

You can read our extensive guide to Capital Allowances here >>

 

Section H: Capital Gains Tax

 

Capital Gains Tax (CGT) is a tax on the profit made when an individual, sole trader, or partner in a business sells or otherwise disposes of an asset that has increased in value. For companies, gains are not subject to CGT; instead, they are treated as chargeable gains and taxed under Corporation Tax.

The tax is applied only to the gain (sale proceeds minus allowable costs), not the total sale value of the asset.

 

1. How CGT Applies

 

CGT applies primarily to individuals, trustees, and personal representatives. Businesses trading through unincorporated structures (sole traders and partnerships) must account for CGT on relevant disposals, whereas companies include gains within their Corporation Tax computation.

Disposals that may give rise to CGT include:
– Selling an asset.
– Gifting an asset (except to a spouse or civil partner, which is generally exempt).
– Exchanging an asset for something else.
– Receiving compensation for loss or destruction of an asset (e.g., insurance payout).

Assets within scope of CGT include property (other than a main residence, which may be covered by Private Residence Relief), shares, business assets, valuable personal possessions worth more than £6,000, and certain investments. Cars are exempt.

Reliefs can reduce or defer liability, including Business Asset Disposal Relief (BADR), Rollover Relief, and Incorporation Relief.

 

2. Calculating Capital Gains Tax

 

The taxable gain is calculated as:

**Disposal proceeds**
minus **allowable costs** (purchase price, stamp duty, legal fees, and incidental selling costs)
minus **enhancement expenditure** (capital improvements that add value).

 

a. Individuals and Sole Traders
For individuals, the gain is reduced by the annual exempt amount (currently £3,000 for 2024/25). Any remaining gains are added to the person’s other income to determine the tax band. CGT rates are:
– 10% for basic rate taxpayers.
– 20% for higher and additional rate taxpayers.
– Residential property (not covered by reliefs) attracts higher rates of 18% (basic) or 24% (higher/additional).

 

b. Partnerships
Each partner calculates their own CGT liability on their share of partnership asset disposals, applying the same allowances and rates as individuals.

 

c. Companies
For companies, capital gains are treated as chargeable gains and taxed under Corporation Tax rules. The gain is added to other taxable profits in the accounting period and taxed at the applicable Corporation Tax rate. Indexation allowance (for inflation) no longer applies for disposals made after 1 January 2018, though earlier accrued relief is preserved.

 

d. Reliefs
– **Business Asset Disposal Relief (BADR):** Gains on qualifying business disposals (such as selling all or part of a trading business, or shares in a personal trading company) may qualify for a 10% CGT rate, subject to a lifetime limit of £1 million.
– **Rollover Relief:** Available if proceeds from business asset sales are reinvested in qualifying new assets, deferring the CGT liability until the new asset is sold.
– **Incorporation Relief:** Available when a business is transferred to a company in exchange for shares.
– **Gift Hold-Over Relief:** Allows gains to be deferred when business assets are given away.

 

3. Reporting and Paying Capital Gains Tax

 

a. Companies
Companies must include chargeable gains in their Corporation Tax Return (CT600), filed within 12 months of the end of the accounting period. Corporation Tax, including tax on gains, is payable within nine months and one day after the accounting period end (or by quarterly instalments for large companies).

 

b. Individuals, Sole Traders and Partnerships
Individuals report capital gains via Self Assessment. The deadline for filing online returns is 31 January following the end of the tax year.

For UK residential property disposals, gains must be reported separately using HMRC’s online “Capital Gains Tax on UK Property” service within **60 days of completion**, and any tax due must be paid within the same timeframe.

 

c. Payment Deadlines
– Self Assessment payment deadline: 31 January following the tax year.
– 60-day deadline for residential property disposals (individuals/trustees).
– Companies: 9 months and 1 day after period end (unless quarterly instalments).

 

You can read our extensive guide to Capital Gains Tax here >>

Section I: Value Added Tax (VAT)

 

Value Added Tax (VAT) is a consumption tax levied on most goods and services sold in the UK. Businesses collect VAT on behalf of HM Revenue and Customs (HMRC) when they make taxable supplies, including selling goods, providing services, and hiring or loaning goods.

The standard VAT rate is 20%, with a reduced rate of 5% for certain goods and services (e.g. domestic fuel, children’s car seats) and a zero rate (0%) for others (e.g. most food, books, and children’s clothing). Some items and services are exempt (e.g. financial services, certain education and health services).

 

1. Which Businesses Need to Register for VAT?

 

Businesses must register for VAT if their taxable turnover exceeds the VAT registration threshold, currently **£90,000** (2024/25) in a rolling 12-month period.

Registration is also required if:
– You expect to exceed the threshold in the next 30 days alone.
– You make taxable supplies from the UK to Northern Ireland consumers under the Northern Ireland Protocol.
– You receive goods into Northern Ireland from the EU above the threshold.

Businesses with turnover below the threshold may register voluntarily. This can be beneficial if the business regularly incurs VAT on purchases and wishes to reclaim it.

Non-UK businesses making taxable supplies in the UK may also be required to register, regardless of turnover.

 

2. Filing VAT Returns

 

Most businesses file VAT returns quarterly, although some use monthly or annual accounting schemes. VAT returns must be submitted online using HMRC’s systems.

Making Tax Digital (MTD):
All VAT-registered businesses must keep digital records and file VAT returns using MTD-compatible software, unless HMRC has granted an exemption.

Businesses must maintain detailed records of sales and purchases, including invoices, receipts, and VAT calculations.

The VAT return includes:
– Output tax (VAT charged on sales).
– Input tax (VAT paid on purchases).
– Net VAT (output minus input).

If output VAT exceeds input VAT, the difference must be paid to HMRC. If input VAT exceeds output VAT, the business can reclaim the difference.

 

3. Paying VAT

 

VAT payments are generally due by the same deadline as filing the VAT return — one month and seven days after the end of the VAT period.

Payment methods include:
– Direct debit (recommended, ensures payment on time).
– Bank transfer (Faster Payments, CHAPS, or Bacs).
– Debit or corporate credit card (online).
– Standing order (for annual accounting schemes).

If a business faces cash flow difficulties, it can request a “Time to Pay” arrangement with HMRC.

 

4. Common VAT Schemes

 

VAT schemes can simplify reporting and payment:

– **Flat Rate Scheme:** Small businesses with turnover under £150,000 (excluding VAT) pay a fixed percentage of turnover. Input VAT is not normally reclaimable (except on certain capital assets over £2,000).
– **Annual Accounting Scheme:** Businesses with turnover up to £1.35 million make advance instalments towards their VAT bill and submit one return a year.
– **Cash Accounting Scheme:** VAT is accounted for on the basis of payments received and made, rather than invoice dates. Available for businesses with turnover up to £1.35 million.
– **Margin Scheme:** For second-hand goods, antiques, works of art, and collectibles, VAT is applied only to the difference between purchase and selling price.

 

5. Penalties and Compliance

 

The VAT penalty system changed in **January 2023**:

– **Late submission penalties** now operate on a points-based system. Each late return earns a penalty point. Once a business reaches its threshold (depending on return frequency), a £200 penalty applies, with further £200 penalties for each late return. Points expire after a compliance period if returns are filed on time.
– **Late payment penalties** apply at:
– 2% of the unpaid VAT at day 15.
– A further 2% if still unpaid at day 30.
– 4% per year (daily) on any outstanding amount after day 30.
– **Interest** is also charged from the due date until payment.

Businesses must keep VAT records for at least six years, including invoices, credit notes, and import/export documents.

 

 

Section J: Pay As You Earn (PAYE)

 

Pay As You Earn (PAYE) is HMRC’s system for collecting Income Tax and National Insurance Contributions (NICs) from employees’ earnings. Employers deduct tax and NICs at source before paying employees, ensuring taxes are collected in real time throughout the year.

 

1. How PAYE Works

 

PAYE applies to wages, salaries, bonuses, overtime, commission, statutory payments (such as statutory sick pay and maternity pay), and taxable benefits in kind.

Employers deduct:
– Income Tax (based on tax codes issued by HMRC).
– Employee National Insurance Contributions (Class 1).
– Student loan and postgraduate loan repayments (if applicable).
– Pension contributions and other authorised deductions.

Employers then report pay and deductions to HMRC using Real Time Information (RTI) submissions, ensuring HMRC receives payroll data each time an employee is paid.

 

2. Employer Responsibilities and Filing Requirements

 

a. Registering as an Employer
Businesses must register with HMRC before their first payday. Registration can be done online. HMRC provides a PAYE reference number and an Accounts Office reference, which must be used for reporting and paying PAYE liabilities.

 

b. Payroll Records
Employers must maintain accurate records of:
– Employees’ personal details.
– Gross pay, deductions, and net pay.
– Employer NICs.
– Tax codes and starter/leaver information.
– Benefits in kind and expenses.

Records must be retained for at least three years after the end of the tax year.

 

c. Real Time Information (RTI) Submissions
Employers must submit an **FPS (Full Payment Submission)** to HMRC on or before each payday, reporting pay, tax, NICs, and deductions.

If no employees are paid or adjustments are required, an **EPS (Employer Payment Summary)** is submitted — e.g. to reclaim statutory payments or declare no liability.

 

d. PAYE Payments
Employers must pay PAYE and NIC liabilities to HMRC:
– Monthly, by the 22nd of the following month (19th if paying by cheque).
– Small employers (average monthly liability under £1,500) may be allowed to pay quarterly.

Payments can be made by direct debit, bank transfer (Faster Payments, CHAPS, or Bacs), or other HMRC-approved methods.

 

e. End-of-Year and Employee Forms
– Employees must receive a **payslip** every payday.
– By **31 May** following the end of the tax year, employers must issue a **P60** to employees in post at year-end, summarising total pay and deductions.
– A **P45** must be issued when an employee leaves.
– Taxable benefits and expenses must be reported using **P11D** (for each employee) and **P11D(b)** (employer’s Class 1A NIC declaration). Class 1A NIC is payable by **22 July** (19 July if by cheque).

 

3. Compliance, Penalties, and Common Pitfalls

 

a. Deadlines
– FPS: on or before each payday.
– EPS: by the 19th of the following month (if applicable).
– PAYE/NIC payment: by the 22nd (19th for cheque).
– P60: by 31 May.
– P11D/P11D(b): by 6 July (with Class 1A NIC due by 22 July).

 

b. Penalties
– Late FPS: £100 to £400 depending on workforce size, per month late.
– Late PAYE/NIC payments: penalties from 1% to 4% of the amount due, escalating for repeated late payments in the same tax year.
– Interest charged on all late payments.
– Penalties may also apply for inaccurate returns, failing to provide forms, or poor record-keeping.

 

c. Common Pitfalls
– Submitting FPS after payday, even if only by one day.
– Using incorrect tax codes (especially for new starters or when HMRC updates codes).
– Misreporting benefits in kind, leading to underpaid tax/NIC.
– Failing to keep PAYE records for the statutory minimum period.

Employers should use HMRC-recognised payroll software to ensure compliance and minimise risks of errors.

 

 

Section K: Business Rates

 

Business rates are a tax on non-domestic properties, collected by local authorities to help fund local services. They apply to most commercial premises such as shops, offices, factories, and warehouses. Business rates are similar in principle to council tax, but are applied to commercial and certain mixed-use properties.

 

1. Who Needs to Pay Business Rates?

 

Business rates are generally payable by:

– Occupiers of non-domestic properties: The person or business using the property is responsible for paying.
– Mixed-use properties: Where a property has both domestic and non-domestic use (e.g. shop with a flat above), business rates apply to the non-domestic part.
– Owners of empty properties: Owners may still be liable for business rates, though certain exemptions and reliefs apply.

Some properties are exempt, such as agricultural land and buildings, and properties used for the training or welfare of disabled people.

 

2. How Business Rates Are Calculated and Paid

 

a. Rateable Value
The Valuation Office Agency (VOA) sets the rateable value (RV) of a property, based on its open market rental value on a specified valuation date. The most recent revaluation took effect on 1 April 2023, using values as at 1 April 2021.

 

b. Multipliers
The government sets the business rates multipliers each tax year:
– Standard multiplier (for 2024/25): 54.6p.
– Small business multiplier (for RVs below £51,000): 49.9p.

The annual bill is calculated as:
**Rateable Value × Multiplier – Reliefs/Exemptions**.

 

c. Reliefs and Exemptions
Several reliefs can reduce liability:
– **Small Business Rate Relief (SBRR):** 100% relief for properties with RV of £12,000 or less; tapering relief for RVs between £12,001 and £15,000. Only available for one property (with limited exceptions).
– **Empty Property Relief:** No rates for the first 3 months a property is empty (6 months for certain industrial premises). After this, full rates usually apply.
– **Charitable Rate Relief:** Up to 80% relief for properties used by charities or community amateur sports clubs (CASCs).
– **Rural Rate Relief:** For eligible rural businesses (e.g. sole village shop or post office) up to 100% relief may apply.
– **Retail, Hospitality & Leisure Relief:** For 2024/25, qualifying businesses receive 75% relief on business rates bills, capped at £110,000 per business.
– **Transitional Relief:** Phases in increases after revaluation, protecting ratepayers from sudden rises.

 

d. Billing and Payment
Local councils issue annual rates bills in February/March, payable in 10 monthly instalments (April to January), with the option to spread across 12 months. Payment can be made by direct debit, bank transfer, cheque, or via council online services.

 

3. Appeals and Revaluations

 

Businesses can challenge their property’s rateable value through the VOA’s **Check, Challenge, Appeal (CCA)** process:
1. **Check:** Confirm property details held by the VOA.
2. **Challenge:** Formally dispute the valuation, providing supporting evidence.
3. **Appeal:** If unresolved, appeal to the independent Valuation Tribunal.

Appeals must usually be made within set time limits, and liability must be paid during the process.

 

4. Common Pitfalls

 

– Failing to apply for available reliefs (e.g. SBRR or Retail, Hospitality & Leisure Relief).
– Not updating the VOA when property details change (extensions, demolitions, or change of use).
– Late payment, which can result in surcharges and enforcement action by local authorities.
– Assuming that vacant properties are exempt beyond the initial relief period.

 

 

Section L: Self-Assessment for Sole Traders and Partnerships

 

Self Assessment is HMRC’s system for collecting Income Tax and Class 2/Class 4 National Insurance from individuals with income that is not fully taxed at source. For employers and owner-managers, it is also the framework that captures dividend tax, chargeable gains, and the High Income Child Benefit Charge (HICBC) where applicable. The rules below reflect the current position for the 2024/25 tax year and are written for UK businesses and their senior finance and HR stakeholders.

 

1. Who Needs to Submit a Self Assessment Tax Return?

 

You must file a Self Assessment return if any of the following apply in a tax year:

a. Sole traders
You run a business as an individual and your gross trading income exceeds the trading allowance (£1,000 for 2024/25). If your gross income is at or below £1,000, you generally do not need to file purely for that income unless you elect to disapply the trading allowance or you have other filing triggers.

b. Partners
You are a partner in a business partnership. The partnership must submit a partnership return and each partner must file their own Self Assessment to report their share of profits or losses.

c. Income not fully taxed at source
You have untaxed income such as rental profits, significant savings interest or dividend income above the relevant allowances, or other miscellaneous untaxed income.

d. Capital gains
You made chargeable disposals (for example, shares or property) and have a Capital Gains Tax (CGT) liability, or need to report gains/losses.

e. High Income Child Benefit Charge (HICBC)
You or your partner received Child Benefit and your adjusted net income exceeds the HICBC threshold for the year. For 2024/25, the threshold is £60,000 and the charge tapers to nil benefit at £80,000.

f. Other HMRC triggers
You have other circumstances that require a return (for example, certain overseas income, claims for reliefs that must be made via return, or HMRC has issued a notice to file).

Important update for PAYE-only high earners
From 2024/25, having employment income taxed entirely via PAYE — even above £150,000 — does not, by itself, create a Self Assessment filing requirement. However, a return is still needed if any of the other triggers above apply (for example, dividend or rental income, CGT, or HICBC). Employers should note this change when advising senior staff and new joiners with complex personal tax profiles.

 

2. How to Complete a Self Assessment Return

 

a. Register with HMRC
Sole traders should register promptly after starting to trade. Partnerships must register the partnership and each partner must also register. HMRC will issue a Unique Taxpayer Reference (UTR).

b. Gather records
Maintain organised records of business income (invoices, sales), allowable expenses (receipts, bills), bank statements, payroll information (if relevant to mixed income), and evidence for any reliefs or allowances claimed.

c. Calculate profits
Add up all business income for the tax year and deduct allowable expenses to arrive at taxable profit. Apply capital allowances where relevant. For partnerships, start from the partnership statement showing each partner’s share.

d. Complete the return online (recommended) or by paper
Use your HMRC online account to complete SA100 and any required supplementary pages (for example, SA103 for self-employment, SA104 for partnerships, SA105 for property income, SA108 for capital gains). Paper filing remains available but has an earlier deadline.

e. Claim reliefs and allowances
Claim the personal allowance (subject to tapering at high incomes), trading allowance if elected, gift aid, pension relief, capital allowances, and other available reliefs as applicable to your facts.

f. Submit and keep records
Submit by the statutory deadline, retain records for at least 5 years after the 31 January submission deadline (longer for companies/other regimes, and for records relevant to ongoing HMRC checks).

g. Payments on account
If your Income Tax liability is over £1,000 and less than 80% was collected at source, HMRC will usually require two payments on account for the next year (due 31 January and 31 July). Any balancing payment is due the following 31 January.

 

3. Filing Deadlines

 

a. 5 October
Deadline to register for Self Assessment if you need to file for the first time for the preceding tax year.

b. 31 October
Deadline for paper tax returns for the preceding tax year.

c. 31 January
Deadline for online tax returns for the preceding tax year and for paying any balancing payment due. First payment on account for the current tax year is also due by this date when applicable. The second payment on account is due by 31 July.

d. Penalties and interest (summary)
Late filing normally triggers an immediate fixed penalty, followed by daily penalties after 3 months, and further penalties at 6 and 12 months. Late payment penalties apply at 30 days, 6 months and 12 months, and statutory interest accrues from the due date. Employers should build these dates into compliance calendars for directors and key staff and consider payroll communication to reduce missed deadlines.

 

 

Section M: National Insurance Contributions

 

National Insurance Contributions (NICs) are payments made to HMRC that help fund state benefits such as the State Pension, statutory maternity pay, and certain social security entitlements. Both employers and workers have responsibilities under the National Insurance system, with rates and thresholds reviewed annually.

 

1. Impact of NICs

 

a. Employees
Employees pay Class 1 NICs through the PAYE system. For 2024/25:
– The main rate of Class 1 NICs is **8%** (reduced from 12% in recent years) on earnings between the Primary Threshold (£12,570 per year) and the Upper Earnings Limit (£50,270).
– Earnings above £50,270 are charged at **2%**.

Regular contributions help employees qualify for state benefits, including the State Pension. Employers must ensure deductions are made in line with current thresholds and tax codes.

 

b. Employers
Employers pay Class 1 secondary contributions on employee earnings above the Secondary Threshold (£9,100 per year for 2024/25). The standard employer NIC rate is **13.8%**.

Additional employer obligations include:
– Paying Class 1A NICs on most taxable employee benefits in kind.
– Paying Class 1B NICs under PAYE Settlement Agreements (PSAs).

 

c. Self-employed Individuals
From 2024/25:
– **Class 2 NICs** are no longer compulsory for most self-employed people, although voluntary Class 2 contributions can be paid to protect entitlement to the State Pension and certain other benefits.
– **Class 4 NICs** apply at **6%** (on profits between £12,570 and £50,270) and **2%** on profits above £50,270.

Self-employed individuals account for NICs through their Self Assessment tax return.

 

d. Voluntary Contributors
Where individuals have gaps in their National Insurance record — for example due to career breaks, unemployment, or working abroad — they may make voluntary contributions.
– **Class 3 NICs** can be paid to protect entitlement to the State Pension. For 2024/25, the Class 3 weekly rate is £17.45.
– Voluntary contributions should be considered strategically, as the financial return depends on proximity to retirement age and benefit eligibility.

 

2. Compliance and Penalties

 

Employers are required to:
– Calculate and deduct Class 1 NICs from employees’ wages.
– Pay employer NICs and submit Real Time Information (RTI) reports to HMRC.
– Report and pay Class 1A and Class 1B NICs where applicable.

Failure to calculate, report, or pay NICs on time may lead to:
– Late payment interest (at HMRC’s statutory interest rate).
– Penalties for inaccuracies in reporting.
– Employer liability for underpaid NICs if deductions were not correctly made.

Self-employed individuals must ensure NICs are correctly declared via Self Assessment.

 

3. Record Keeping

 

Accurate payroll and financial records are essential. Employers must retain payroll, NIC, and benefit reporting records for at least three years. Self-employed individuals should maintain detailed records of business profits, contributions made, and any voluntary payments.

Employees can check their NIC record using HMRC’s online service to identify gaps and determine whether voluntary contributions may be advisable.

 

 

Section N: R&D Tax Credits

 

Research and Development (R&D) Tax Credits are government incentives designed to encourage UK companies to invest in innovation. They provide relief either by reducing Corporation Tax liabilities or, in certain cases, by offering a payable cash credit. The schemes are administered by HMRC and apply only to companies within the scope of UK Corporation Tax.

Significant reforms have been introduced in recent years, with the SME scheme and RDEC being consolidated into a merged regime for accounting periods beginning on or after 1 April 2024, alongside a separate regime for “R&D-intensive SMEs”.

 

1. Who Can Claim R&D Tax Credits?

 

To qualify, the claimant must be a UK limited company subject to Corporation Tax. The company must be undertaking a project that:
– Seeks to achieve an advance in science or technology, and
– Involves resolving scientific or technological uncertainties that competent professionals could not readily work out.

Qualifying costs must be directly attributable to the R&D activity. Examples include staffing, consumables, software, and certain subcontractor and externally provided worker costs.

 

2. Current R&D Relief Regimes

 

a. Main merged scheme (from April 2024)
For accounting periods starting on or after 1 April 2024, a new single R&D relief merges elements of the SME and RDEC schemes. Relief is generally given as an above-the-line expenditure credit equal to **20% of qualifying R&D spend**, taxable at the Corporation Tax rate (effective benefit ~15%).

 

b. R&D-intensive SMEs (from April 2023/24)
Companies with qualifying R&D expenditure that makes up at least 30% of their total expenditure (lowered from 40% from April 2024) may access an enhanced payable credit. For loss-making R&D-intensive SMEs, the credit is worth **14.5%** of the surrenderable loss.

 

c. Legacy rules (for periods before April 2024)
– SME scheme: Provided a 186% enhanced deduction for qualifying expenditure (effective from April 2023) and, for loss-making SMEs, a repayable credit at 10%.
– RDEC scheme: Large companies (and certain SMEs excluded from the SME scheme due to grants or subsidies) could claim a taxable credit at **20%** of qualifying expenditure (rate increased from 13% to 20% in April 2023).

 

3. Qualifying R&D Costs

 

Eligible expenditure categories include:
– Staffing costs (salaries, NICs, pensions).
– Externally provided workers and certain subcontracted R&D.
– Consumables and materials used in R&D.
– Software and cloud computing costs.
– Power, water, and fuel used in R&D.
– From April 2023, data licences and cloud computing services can also qualify.

 

4. How to Claim

 

– Claims must be made through the Company Tax Return (CT600), with the additional form CT600L for R&D credits.
– A detailed technical narrative explaining the R&D projects, scientific or technological uncertainties, and qualifying expenditure must be prepared and submitted via HMRC’s online portal.
– From August 2023, all claims must be pre-notified within **six months of the end of the accounting period** if the company is making its first claim or has not claimed in the last three years.
– Supporting records (payroll, invoices, contracts) must be maintained.

 

5. Processing and HMRC Review

 

HMRC reviews R&D claims and may raise enquiries. The review can take weeks to months depending on claim size and complexity. A well-prepared claim with strong technical evidence reduces the risk of delay or rejection.

Where successful, HMRC adjusts the company’s Corporation Tax liability or issues a payable credit, depending on the company’s circumstances.

 

6. Common Pitfalls and Best Practices

 

– Submitting claims without sufficient technical evidence to demonstrate qualifying R&D activity.
– Misclassifying routine work, commercial projects, or market research as R&D.
– Failing to apply the pre-notification rules for first-time or lapsed claimants.
– Overstating subcontractor costs where restrictions apply.
– Poor record-keeping, which makes it difficult to substantiate the claim.

Best practice includes early planning of claims, engaging R&D tax specialists when appropriate, and maintaining contemporaneous project documentation.

 

 

Section O: Dividends

 

Dividends are distributions of post-tax profits to shareholders. For individuals receiving dividends, tax applies on the amount above available allowances and reliefs, at dividend-specific rates. For owner-managed companies, board formalities and Companies Act rules on distributable profits must be followed to avoid unlawful distributions. Dividends are not deductible for Corporation Tax and do not attract employer or employee NICs, unlike salary.

 

1. Dividend Allowance and Tax Rates

 

Every individual has a Dividend Allowance that taxes the first slice of dividend income at 0% (it is a nil-rate band, not an extra deduction). For the **2024/25** tax year, the Dividend Allowance is **£500**. The allowance still counts towards your basic/higher/additional rate bands.

Dividends are taxed after non-savings income and (most) savings income. Once the allowance is used, dividend tax rates for 2024/25 are:
– **8.75%** within the basic rate band
– **33.75%** within the higher rate band
– **39.35%** within the additional rate band

Key points:
– The personal allowance (£12,570, subject to taper above £100,000) can cover dividends if not already used.
– The Dividend Allowance is separate from the Personal Savings Allowance and the starting rate for savings (which do not apply to dividends).
– Scottish income tax bands do **not** apply to dividends; UK-wide dividend rates and thresholds apply.

 

2. Impact on Different Income Levels

 

Tax bands for 2024/25 relevant to dividends (UK-wide for this purpose):
– **Basic rate band** up to £50,270 (after personal allowance), dividend rate 8.75% above the first £500.
– **Higher rate band** £50,271 to £125,140, dividend rate 33.75%.
– **Additional rate** over £125,140, dividend rate 39.35%.

Ordering rules matter: non-savings income (salary, rental, trading) uses the bands first, then savings, then dividends. As income rises, a greater proportion of dividends is taxed at higher rates. Where adjusted net income exceeds £100,000, the personal allowance is tapered, which can push more dividends into higher rates.

Planning notes for employers/owner-managers:
– Ensure sufficient **distributable reserves** before declaring a dividend; otherwise it may be unlawful and repayable.
– Minute **board decisions** for interim dividends and record **shareholder approvals** for finals.
– Consider the interaction with child benefit (HICBC), student loan repayments, and payments on account.
– Dividends do not count as “qualifying earnings” for pensions; salary may be needed to secure desired pension contributions.

 

3. How to Report and Pay Tax on Dividends

 

a. Reporting thresholds
– If total dividends are **over £10,000**, you must file a Self Assessment return.
– If dividends are **£10,000 or less**, HMRC may be able to collect the tax via your PAYE code; however, Self Assessment is still required if you already file for other reasons (e.g. rental income, CGT, HICBC).

b. Self Assessment reporting
– Keep **dividend vouchers** and company statements showing the amount and date.
– Enter the gross cash amount received (UK dividends are paid without tax credit).
– If you receive dividends from multiple sources, report the total and keep source-by-source records.

c. Paying the tax
– Any tax due is payable by **31 January** following the end of the tax year.
– If your overall Self Assessment bill is more than £1,000 and less than 80% of your tax is collected at source, **payments on account** are due on 31 January and 31 July.
– HMRC offers “Time to Pay” arrangements if cash flow is tight.

d. Dividend Reinvestment Plans (DRIPs)
Dividends reinvested to buy more shares are **still taxable** in the year they arise. Report the cash value reinvested.

e. Foreign dividends
Dividends from overseas companies are taxable in the UK. A **foreign tax credit** may be available under double tax treaties; report the gross amount received and any foreign withholding tax. Exchange rates should reflect the HMRC year-average or spot rate method consistently.

f. Company law compliance for paying dividends
– Confirm **distributable profits** with up-to-date accounts/management information.
– Approve dividends via **board minutes** (interim) or shareholder resolution (final).
– Issue a **dividend voucher** to each shareholder stating date, company, shareholder, and amount.
– Avoid back-dating decisions or paying dividends where reserves are insufficient; HMRC may recharacterise payments (e.g. as earnings or loans to participators), triggering income tax/NICs or s455 charges.

g. Record-keeping
Maintain dividend vouchers, minutes/resolutions, proof of payment, and reserve calculations. Retain for at least **six years** alongside statutory company books and tax records.

 

 

Section P: Tax Reliefs and Allowances Overview

 

Tax reliefs and allowances are government mechanisms to reduce the tax burden on businesses and incentivise investment, growth, and innovation. Understanding the scope of these reliefs enables finance directors and business owners to manage cash flow and reduce effective tax liabilities.

 

1. Key Business Tax Reliefs

 

a. Annual Investment Allowance (AIA)
Provides 100% relief on qualifying capital expenditure on plant and machinery (excluding cars) up to £1 million per year. This permanent cap allows most SMEs to deduct all qualifying investment immediately.

 

b. Full Expensing
Introduced in April 2023 and made permanent in the Autumn Statement 2023, full expensing allows companies to claim 100% first-year relief on new qualifying main rate plant and machinery. Special rate assets qualify for a 50% first-year allowance. Only companies (not unincorporated businesses) can claim, and the asset must be new (not second-hand).

 

c. Research and Development (R&D) Tax Relief
As of April 2024, most companies claim under the merged R&D expenditure credit (20% above-the-line credit). R&D-intensive SMEs (with qualifying R&D costs ≥30% of total spend) can claim a payable credit at 14.5% of surrenderable losses. Legacy SME/RDEC rules still apply for earlier periods.

 

d. Capital Allowances
Reliefs for depreciation of qualifying assets, including Writing Down Allowances, First-Year Allowances (for low-emission vehicles and energy-efficient kit), Structures and Buildings Allowance (3% per year), and R&D Allowances (100%).

 

e. Small Business Rate Relief (SBRR)
Available in England for properties with a rateable value up to £15,000. 100% relief applies to RVs of £12,000 or less; tapered relief applies from £12,001 to £15,000. Scotland, Wales, and Northern Ireland operate separate business rate relief schemes.

 

f. Enterprise Investment Scheme (EIS)
Provides income tax relief at 30% for investors subscribing for shares in qualifying high-risk companies, up to £1 million annually (£2 million if at least £1m is in knowledge-intensive companies). Gains may also be exempt if shares are held for three years.

 

g. Seed Enterprise Investment Scheme (SEIS)
Supports very early-stage companies. Investors receive 50% income tax relief on investments up to £200,000 annually. SEIS also provides CGT reliefs.

 

h. Patent Box
Allows companies to apply a 10% Corporation Tax rate to profits attributable to qualifying patented inventions. Requires active ownership of qualifying IP and compliance with HMRC “nexus fraction” rules.

 

i. Creative Industry Reliefs
Film, TV, theatre, video games, and orchestral production reliefs provide enhanced deductions or repayable credits on qualifying UK expenditure. These regimes are evolving into an “Audio-Visual Expenditure Credit” from 2024.

 

j. Loss Relief
Trading losses can be set against:
– Profits of the same accounting period.
– Previous 12 months’ profits (carry-back).
– Future profits of the same trade (carry-forward).
Extended carry-back to 3 years applied temporarily in 2020–2022 but has now expired.

 

2. How to Apply and Benefit from These Reliefs

 

a. Identify Eligible Expenditures
Businesses must analyse investments and operating costs to determine eligibility. Keep contemporaneous records (invoices, contracts, R&D project notes).

 

b. Prepare Documentation
Detailed supporting evidence is required for all claims — for example, fixed asset registers for AIA/full expensing, or technical reports for R&D.

 

c. Claim via Corporation Tax Return
Claims are made through the CT600. Supplementary pages (e.g. CT600L for R&D credits) must be completed where relevant.

 

d. Deadlines
Reliefs must usually be claimed within two years of the end of the accounting period (e.g. for AIA and R&D). Missing deadlines can mean losing reliefs.

 

e. Professional Input
Given HMRC scrutiny of areas such as R&D and creative reliefs, many businesses benefit from engaging professional advisers to maximise legitimate claims and avoid errors.

 

f. Monitoring and Reviewing
Reliefs evolve frequently (e.g. R&D reform, full expensing changes). Finance teams should review activity regularly and amend earlier returns if reliefs were missed (within statutory time limits).

 

 

Section Q: Penalties and Appeals

 

HMRC imposes penalties to enforce compliance with tax legislation. These can arise for late filing, late payment, inaccuracies, or failing to notify liability. Since 2023, VAT and Income Tax late filing/payment penalties are moving to a new points-based regime, replacing the previous “default surcharge”.

 

1. Common Business Tax Penalties

 

a. Corporation Tax late filing
– £100 fixed penalty for filing up to 3 months late.
– A further £100 if more than 3 months late.
– At 6 months late, HMRC estimates the bill and adds a penalty of 10% of unpaid tax.
– At 12 months late, another 10% is added.
– Repeated late filing increases fixed penalties to £500.

 

b. Corporation Tax late payment
– Interest charged from the day after the due date (currently HMRC late payment interest is **7.75%** as at August 2025).
– No statutory surcharge, but persistent late payers may face compliance checks.

 

c. VAT late filing (from Jan 2023 regime)
VAT returns filed late attract penalty “points”:
– 1 point per late submission.
– Once a business reaches its penalty threshold (based on filing frequency), a £200 fine applies.
– Thresholds: 2 points for annual filers, 4 for quarterly, 5 for monthly. Points expire after a period of compliance.

 

d. VAT late payment penalties
– Payments 1–15 days late: no penalty if paid or agreed Time to Pay by day 15.
– 16–30 days late: 2% of amount unpaid at day 15.
– Over 30 days late: 2% of amount unpaid at day 15, plus 2% of amount unpaid at day 30.
– Ongoing penalty: 4% per year (0.33% per day) until paid.
– Interest charged from day after due date.

 

e. PAYE Real Time Information (RTI) penalties
– £100 per late Full Payment Submission (FPS) for up to 9 employees, £200 for 10–49 employees, £300 for 50–249, £400 for 250+.
– Daily penalties may apply for prolonged non-filing.
– Late payment penalties: 1%–4% of amounts outstanding, depending on number of defaults.

 

f. Self Assessment late filing and payment
– £100 fixed penalty immediately after 31 January deadline.
– Daily penalties (£10 per day, up to £900) after 3 months.
– 6 months: 5% of tax due (or £300 if higher).
– 12 months: another 5% (or £300 if higher).
– Late payment penalties: 5% of tax unpaid at 30 days, 6 months, and 12 months.
– Interest charged from the due date.

 

g. Inaccurate returns
Penalties vary by behaviour:
– Careless errors: 0–30% of extra tax due.
– Deliberate but not concealed: 20–70%.
– Deliberate and concealed: 30–100%.
Reductions are available for unprompted disclosure and cooperation.

 

h. Failure to notify
If a business fails to register for VAT or notify HMRC of taxable profits, penalties range from 0–30% for non-deliberate failures up to 100% of tax due for deliberate and concealed failures.

 

2. How to Appeal Against Tax Penalties

 

a. Grounds for appeal
Valid grounds include “reasonable excuse” (e.g. serious illness, bereavement, HMRC service failure, IT breakdown) and errors attributable to HMRC. Lack of funds is not normally accepted.

b. Appeal process
– Appeals must be lodged within 30 days of penalty notice.
– Appeals can be made online (via HMRC account), by completing the form supplied, or by letter.
– The appeal should state the reason, grounds relied upon, and supporting evidence.

c. HMRC review
HMRC may conduct an internal review by a different officer. If unsuccessful, businesses can escalate to the independent Tax Tribunal.

d. Practical steps
– Maintain full records to show compliance or support “reasonable excuse” claims.
– Engage professional advisers where penalties are substantial or disputed.
– Correct errors promptly and make voluntary disclosures to mitigate penalties.

 

3. Avoiding Future Penalties

 

– Maintain robust compliance calendars for Corporation Tax, VAT, PAYE, and Self Assessment.
– Use HMRC-approved software to reduce risk of filing errors.
– Train finance staff in recognising and reporting issues early.
– Engage with HMRC quickly to negotiate “Time to Pay” arrangements before deadlines pass.

 

 

Section R: Other Business Taxes and Compliance Areas

 

In addition to the core business taxes already covered, UK businesses may also encounter a range of other tax obligations and compliance regimes. While not every business will be affected, awareness of these areas is important for planning and risk management.

 

1. Other Indirect Taxes

 

– Stamp Duty and SDLT: Stamp Duty Land Tax applies on property and land purchases in England and Northern Ireland. Companies acquiring UK residential property may also face the 3% surcharge and, for non-resident purchasers, the additional 2% surcharge.
– Excise Duties: Duties apply to alcohol, tobacco, and fuel, with complex rules around production, import, and sale.
– Customs Duty and Import VAT: Since Brexit, businesses importing from outside the UK must deal with customs declarations, tariffs, and import VAT accounting.

 

2. Employer-Linked Levies

 

– Apprenticeship Levy: Charged at 0.5% of an employer’s pay bill if it exceeds £3 million. Funds can be used to pay for approved apprenticeship training.
– Benefits in Kind (BIK): Taxable benefits provided to employees (such as company cars, health insurance, or loans) must be reported via P11D/P11D(b) and are subject to Class 1A NICs.

 

3. International and Cross-Border Issues

 

– Withholding Tax: Certain payments made overseas, such as royalties or interest, may be subject to UK withholding tax unless reduced by a tax treaty.
– Permanent Establishments: Overseas companies with a UK branch or office are liable for UK Corporation Tax on attributable profits.
– Double Tax Treaties: The UK has extensive treaty coverage to reduce double taxation, but businesses must ensure claims are correctly evidenced.

 

4. Emerging Compliance Areas

 

– Making Tax Digital for Income Tax (MTD ITSA): Due to apply from April 2026 for some self-employed individuals and landlords. Businesses should prepare for further digital record-keeping obligations.
– IR35 and Off-Payroll Working: Medium and large companies engaging contractors through personal service companies must assess employment status and operate PAYE where required.
– Sector-Specific Levies: For example, the Plastic Packaging Tax, Climate Change Levy, and sectoral environmental charges, which can affect manufacturers, utilities, and energy-intensive businesses.

 

Section Summary

 

While not all businesses will encounter these regimes, directors and finance teams should be alert to the wider UK tax landscape. Reviewing potential exposure to SDLT, customs duty, levies, and international rules ensures no compliance gaps, especially for businesses growing in size, acquiring property, or trading internationally. These areas sit alongside the core Corporation Tax, VAT, PAYE, NICs, and business rates regimes already discussed, completing the picture of UK business taxation.

 

 

 

 

Section S: Summary

 

Managing UK business taxes requires coordination across Corporation Tax, VAT, PAYE/NICs, business rates, capital allowances, R&D, CGT/chargeable gains, dividends, and a growing landscape of reliefs. Compliance is not just about meeting deadlines; it is about structuring processes, records, and controls so that filings are accurate, claims are fully evidenced, and cash flow is optimised.

For incorporated businesses, the core calendar centres on three pillars: (1) filing statutory accounts at Companies House, (2) submitting the CT600 with accurate computations and supporting schedules, and (3) paying Corporation Tax by nine months and one day after the period end (or by quarterly instalments for larger companies). Across all structures, VAT compliance under Making Tax Digital demands digital records and timely submissions; the post-January 2023 penalty system makes punctual filing and payment a financial imperative. Employers must operate RTI correctly, calculate PAYE/NICs on time, and complete P11D/P11D(b) and Class 1A NICs within statutory dates.

On tax efficiency, capital allowances (AIA, full expensing/50% FYA, WDA, SBA, RDAs) turn investment into accelerated tax relief when chosen and sequenced correctly. The reformed R&D regime (merged credit and the R&D-intensive SME route) rewards genuine innovation where technical uncertainty is evidenced and costs are tracked. For owner-managers, dividend planning should respect company law (distributable reserves, minutes, vouchers) and personal banding, and must be weighed against pension planning, HICBC exposure, and payments on account.

Sector-specific frameworks matter. CIS requires monthly verification, deduction, statements, and returns with strict 19th/22nd month-end timings. Business rates rely on VOA valuations, multipliers, and reliefs, with appeals via Check, Challenge, Appeal. For disposals, individuals face CGT (with a £3,000 annual exempt amount in 2024/25 and special rates for residential property), while companies fold chargeable gains into Corporation Tax.

Penalties have become more automated and points-based, and HMRC increasingly expects digital-by-default behaviour. Robust internal controls, reconciled ledgers, fixed asset registers, benefit tracking, and contemporaneous R&D documentation are now baseline expectations. Where cash pressure arises, early Time to Pay discussions reduce cost and risk.

In practice, the finance and HR leadership agenda should include: a live compliance calendar; documented accounting policies for capitalisation and allowances; standard packs for CT/VAT/R&D audits; periodic dividend-law checks; CIS control testing where relevant; and training for payroll and finance teams on changing VAT and RTI penalties. With these foundations in place, businesses can both meet their legal obligations and access available reliefs in a defensible, cash-efficient way—freeing leadership to focus on operations and growth while minimising compliance drag and penalty risk.

 

 

Section T: FAQ

 

What is Corporation Tax and who needs to pay it?
Corporation Tax is charged on the taxable profits of UK limited companies and some other organisations such as clubs, societies, and associations. Overseas companies with a UK permanent establishment also pay Corporation Tax on UK-source profits.

 

When do I need to file my company’s tax return?
The Company Tax Return (CT600) must be filed online within 12 months of the end of the accounting period. For example, if the accounting period ends 31 March 2025, the filing deadline is 31 March 2026.

 

What are Capital Allowances?
They are tax reliefs for capital expenditure on plant, machinery, buildings, and certain R&D assets. They replace accounting depreciation for tax purposes and reduce taxable profits. Reliefs include Annual Investment Allowance (£1m cap), Full Expensing (100% first-year relief on new qualifying assets), 50% First-Year Allowance, Writing Down Allowances, and Structures and Buildings Allowance (3% per year).

 

Who needs to register for VAT?
Businesses with taxable turnover over the VAT registration threshold (£90,000 for 2024/25) must register. Voluntary registration is possible below this threshold if the business makes taxable supplies.

 

How do I calculate and pay tax on capital gains?
– Companies: chargeable gains are included in taxable profits and subject to Corporation Tax.
– Individuals/sole traders/partnerships: Capital Gains Tax is calculated on the gain after allowable costs and reliefs. For 2024/25, the annual exempt amount is £3,000. Rates: 10% or 20% (basic/higher rate), with residential property gains at 18% or 24%. Payment is due by 31 January following the tax year (with separate 60-day deadlines for residential property disposals).

 

What is the Construction Industry Scheme (CIS)?
A regime for contractors and subcontractors in construction. Contractors must register, verify subcontractors, deduct CIS tax at 20%/30% where required, submit monthly returns by the 19th, and pay deductions by the 22nd. Subcontractors offset deductions against their Corporation Tax or Self Assessment liability.

 

How do I claim R&D Tax Credits?
Include qualifying expenditure and project details in the Company Tax Return (CT600 + CT600L). From August 2023, first-time or lapsed claimants must pre-notify within 6 months of period end. From April 2024, most companies claim under the merged expenditure credit regime; R&D-intensive SMEs may access a higher payable credit. Supporting records and a technical report are essential.

 

What are the penalties for late filing of tax returns?
– Corporation Tax: £100 fixed penalty at one day late, a further £100 at three months, plus 10% of unpaid tax at six and twelve months.
– VAT: late submission accrues penalty points; £200 fine at threshold. Late payment penalties apply from day 16.
– PAYE: £100 per late RTI submission (smallest band), higher for larger payrolls.
– Self Assessment: £100 fixed penalty, daily penalties after 3 months, 5% surcharges at 6 and 12 months.

 

How are National Insurance Contributions (NICs) calculated?
Employees pay Class 1 NICs (8% between £12,570–£50,270; 2% above). Employers pay Class 1 secondary NICs at 13.8% on pay above £9,100. Self-employed pay Class 4 NICs (6% between £12,570–£50,270; 2% above). Class 2 NICs are now voluntary only. Voluntary Class 3 can be paid to fill contribution gaps.

 

What reliefs and allowances are available to businesses?
AIA (£1m), Full Expensing, R&D credits, Patent Box, Creative Reliefs, EIS/SEIS, loss reliefs, Business Rates reliefs, and various NICs exemptions. Eligibility and claim methods vary; most are claimed via the Corporation Tax return.

 

How can I appeal against a tax penalty?
Appeal within 30 days of the notice, either online or in writing. Grounds must be reasonable (e.g. serious illness, HMRC IT failure). HMRC may conduct an internal review; unresolved disputes can be escalated to the independent Tax Tribunal.

 

When is the deadline for paying Corporation Tax?
Nine months and one day after the end of the accounting period for small/medium companies. Large companies with profits over £1.5 million (adjusted for associated companies) pay by quarterly instalments.

 

What is PAYE and how does it affect employers?
PAYE (Pay As You Earn) is HMRC’s system for collecting Income Tax, NICs, student loan deductions, and other payments at source. Employers must use payroll software to calculate deductions, issue payslips, report through RTI each payday, and make payments by the 22nd (electronic) or 19th (cheque).

 

What are business rates and who needs to pay them?
A tax on non-domestic properties, payable by occupiers (or owners if empty). Based on VOA-assessed rateable value multiplied by the government-set multiplier. Reliefs exist for small businesses, charities, and rural properties. Bills are paid to local authorities, usually in 10 instalments.

 

How do dividends affect my tax liability?
Dividends are paid from company profits after Corporation Tax. They are not deductible for the company and do not attract NICs. Individuals pay tax above the £500 Dividend Allowance at 8.75%, 33.75%, or 39.35%, depending on their income band. Dividends must be lawfully declared with distributable reserves, board minutes, and vouchers.

 

 

Section U: Glossary of UK Business Tax Terms

 

Annual Investment Allowance (AIA): A capital allowance permitting 100% tax relief on qualifying plant and machinery expenditure up to £1 million each year.

Capital Allowances: Deductions for depreciation of business assets, replacing accounting depreciation for tax purposes. Includes AIA, Full Expensing, Writing Down Allowances, Structures and Buildings Allowance, and R&D Allowances.

Capital Gains Tax (CGT): A tax on gains from selling or disposing of assets. For companies, gains are taxed as part of Corporation Tax. For individuals, CGT is payable at 10%/20% or 18%/24% for residential property.

Chargeable Gains: Gains subject to Corporation Tax when a company disposes of capital assets.

Construction Industry Scheme (CIS): A HMRC scheme requiring contractors to verify subcontractors, deduct CIS tax from payments, and file monthly returns.

Corporation Tax: A tax charged on the profits of UK companies and certain organisations. The main rate is 25% in 2024/25, with small profits rate of 19% up to £50,000, and marginal relief between £50,000–£250,000.

Dividend Allowance: A £500 nil-rate band for dividend income (2024/25), applied before dividend tax rates.

Dividends: Payments made from a company’s distributable post-tax profits to shareholders. Subject to dividend tax rates above the allowance.

Full Expensing: 100% Corporation Tax relief on qualifying expenditure on new main-rate plant and machinery, available permanently from April 2023.

Making Tax Digital (MTD): HMRC initiative requiring businesses to keep digital VAT records and file VAT returns via compatible software. Planned extension to Income Tax and Corporation Tax.

National Insurance Contributions (NICs): Payments by employees, employers, and the self-employed that fund state benefits. Rates vary by class (1, 2, 3, 4).

PAYE (Pay As You Earn): System for employers to deduct Income Tax and NICs at source from employees’ wages and pay them to HMRC. Operated through Real-Time Information (RTI).

Patent Box: A regime allowing companies to apply a 10% Corporation Tax rate to profits from qualifying patented inventions.

R&D Tax Relief: Corporation Tax relief for companies carrying out qualifying R&D. Since April 2024, most claims fall under the merged expenditure credit (20%), with a separate R&D-intensive SME credit at 14.5%.

Rateable Value: The assessed annual rental value of a non-domestic property, set by the Valuation Office Agency, used to calculate business rates.

Real-Time Information (RTI): HMRC system requiring employers to submit payroll information electronically each time employees are paid.

Self Assessment: HMRC’s system for individuals and partnerships to report income, gains, and expenses annually. Filing deadlines are 31 October (paper) and 31 January (online).

Small Business Rate Relief (SBRR): Relief from business rates for properties with a rateable value of £15,000 or less. Full relief applies up to £12,000; tapered relief from £12,001 to £15,000.

Statutory Accounts: Annual financial statements prepared by companies under the Companies Act, including balance sheet, profit and loss account, notes, and (for many companies) a Directors’ Report.

Taxable Profits: The profits on which Corporation Tax is charged, calculated by adjusting accounting profit for disallowable expenses, reliefs, and capital allowances.

Value Added Tax (VAT): A consumption tax levied on taxable supplies of goods and services. Standard rate 20%, reduced rate 5%, and zero rate apply to different goods/services.

Writing Down Allowance (WDA): An annual percentage deduction for the cost of plant and machinery not fully relieved by AIA or First-Year Allowances. Currently 18% (main pool) or 6% (special rate pool).

 

 

Section V: Additional Resources

 

HM Revenue & Customs (HMRC)
https://www.gov.uk/government/organisations/hm-revenue-customs
Primary authority for UK tax administration. Guidance on Corporation Tax, VAT (including MTD), PAYE/RTI, CIS, R&D, penalties, and appeals.

 

HMRC: Check if you need to send a Self Assessment tax return
https://www.gov.uk/check-if-you-need-tax-return
Interactive tool to determine if a Self Assessment return is required in a given tax year.

 

Companies House
https://www.gov.uk/government/organisations/companies-house
Company filing obligations, accounts deadlines, authentication codes, and incorporation guidance.

 

GOV.UK: Business and self-employed
https://www.gov.uk/browse/business
Central hub for government services and guidance for businesses, including support schemes, rates, and sector-specific rules.

 

Valuation Office Agency (VOA): Business rates
https://www.gov.uk/introduction-to-business-rates
Explains rateable value, multipliers, reliefs, the Check–Challenge–Appeal process, and revaluations.

 

HMRC: Making Tax Digital for VAT
https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat
Eligibility, software requirements, and digital record-keeping rules.

 

HMRC: CIS (Construction Industry Scheme)
https://www.gov.uk/what-you-must-do-as-a-cis-contractor
Registration, verification, deduction rates, monthly returns (CIS300), and payment deadlines.

 

HMRC: R&D tax reliefs
https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief
Eligibility criteria, merged regime rules, R&D-intensive SME credit, and claim process (including CT600L and pre-notification).

 

HMRC: Capital allowances
https://www.gov.uk/capital-allowances
AIA, writing down allowances, first-year allowances (including cars and energy-efficient equipment), full expensing, SBA, and RDA.

 

HMRC: PAYE and payroll (RTI)
https://www.gov.uk/running-payroll
Employer registration, FPS/EPS, forms P45/P60/P11D/P11D(b), Class 1A NICs, and payment schedules.

 

HMRC: VAT penalties (from January 2023)
https://www.gov.uk/guidance/penalties-for-late-vat-returns-and-late-vat-payments
Points-based late submission penalties, staged late payment penalties, and interest.

 

British Chambers of Commerce (BCC)
https://www.britishchambers.org.uk/
Policy updates, business guidance, and local chamber support.

 

The Institute of Chartered Accountants in England and Wales (ICAEW)
https://www.icaew.com/
Technical guidance, faculty materials, and practice resources for finance teams and advisers.

 

The Confederation of British Industry (CBI)
https://www.cbi.org.uk/
Regulatory updates and business policy insights.

 

Federation of Small Businesses (FSB)
https://www.fsb.org.uk/
Guidance and advocacy for SMEs, including tax, rates, and employment resources.

 

Office for National Statistics (ONS)
https://www.ons.gov.uk/
Economic and labour market data to support planning, budgeting, and forecasting.