Limited company tax calculator (Guide)

How does the Limited Company tax calculator work?

Corporation tax must be paid on profits a limited corporation makes, excluding any reliefs claimed. The corporate tax rate ranges between 19% to 25%. Companies have no personal allowance; therefore, all earnings are taxable.

A company's net taxable trading profit determines the corporation tax you pay.

Because of the profit tax, you must calculate your net trading profit for the period. It may differ from the gain on your profit and loss statement because some things aren't included for corporation tax purposes—for example, annual investment allowance and different depreciation rates.

Assume your limited company's revenue was £500,000 last year. You made a £300,000 profit after incurring £200,000 in expenses. You would owe £50,000 in corporation tax at 25%.

What taxes does your limited company pay?

Corporation tax

Effective corporation tax, ranging between 19% and 25%, is due on profits made by limited companies. If your contract isn't subject to IR35, you'll probably pay yourself a low wage plus dividends. Salaries are a tax-deductible business expense, but you'll have to pay corporation tax on your profit after deducting any allowances.

Dividends are paid from the company's after-tax retained profits.

Your business must file a corporation tax return every year. All limited firms in the United Kingdom, including personal service companies, must pay corporation tax on their profits.

Employer's National Insurance Contributions (NICs)

This is calculated based on your gross wage and is estimated at 13.8% on earnings above £175 per week. It is paid monthly or quarterly, depending on the PAYE / NIC bill of the company.

If your contract falls under IR35, your income will increase due to your Employer's NIC bill.

VAT (Value Added Tax)

If your business is registered at the standard rate, you must charge 20% VAT on your invoices. You usually account for this every quarter, in most cases. You can claim input VAT paid on your company purchases as a deduction.

Certain businesses can register for the Flat Rate VAT scheme as small businesses, a government incentive to simplify VAT.

This implies that you charge a standard rate of 20% on your invoices, yet you pay a reduced rate to HMRC. This charge is 16.5% if you are classified as a limited-cost trader. Otherwise, your pay rate is determined by your profession.

Dividend tax-free allowance

The dividend allowance for the 2024/25 tax year is at £500 (2023/24: £1,000). This implies you can withdraw up to £500 in dividends as a shareholder before paying any dividend tax.

This allowance is tax-free but still uses £500 of your basic rate tax allowance.

How to complete a limited company tax return

Your company must file a tax return even if you make losses or have no Corporation Tax to pay. It includes calculating your corporation tax bill and your profit and loss for corporation tax. In addition to filing your yearly accounts with Companies House, your accountant can plan and file this on your behalf.

Your company's tax return has a 12-month deadline following the end of the accounting period it covers.

The payment date for your corporation tax bill is usually nine months and one day after the accounting period ends. For failing to meet these deadlines, HMRC imposes penalties.

How long should a limited company's tax records be kept?

You must keep financial and accounting records relevant to your limited company for six years from the end of the last business financial year they relate to and company records.

It comprises receipts, invoices, contracts, bank statements, and records of the company's money spent and received.

What are the key benefits of the Limited Company Calculator?

If you plan to contract through a limited company, you can use the limited company tax calculator to calculate your contractor's take-home income. A limited company salary calculator will determine your take-home pay, split between salary and dividends, based on your income.

It is helpful when comparing an umbrella company to a limited company.

Using the UK limited company tax calculator, you can quickly see the benefits of forming a limited liability company. It enables you to plan the foundation of your limited company and assess how much tax you can save by avoiding using an umbrella company.

The corporation's registered office is in England, Wales, Northern Ireland and Scotland.

In addition to corporation tax, other taxes such as VAT, National Insurance Contributions, import duties, or stamp duty could be payable.