Hello dear readers! If you have just opened your limited company in the UK or are just planning to do so, this article is especially for you. So let’s understand what taxes and reports you’ll have to deal with. For your convenience, we have broken the information down into simple sections.

To avoid confusion about the timing of payments and reports, we need to familiarise ourselves with two new terms that do not exist in Ukraine: tax year and fiscal year. In our country, a year is a year and it ends on 31 December, when we all celebrate the New Year. This is not the case in Britain, or rather not at all. So… In our country, a year is a year, and it ends on December 31, when we all celebrate the New Year’s holiday. In Britain, this is not the case, or rather not at all. So…

What is a “tax year” and a “financial year” in the UK?

There are two types of “year” in the UK: “tax year” and “financial year”.

1. Tax year: runs from 6 April to 5 April of the following year. The tax year is used for filing annual returns for the self-employed and for employee reporting. In addition, tax rates change with the tax year, as do the minimum wage and various benefits. Companies must pay their taxes according to the fiscal year.
2. Fiscal year: usually reflects the business cycle of the company. Your financial year usually starts on the day the company is incorporated (e.g. 12 June 2023) and lasts 12 months until 11 June 2024. However, the year cannot end in the middle of the month, so the accounts will be prepared as at 30 June of the following year. In future, for all subsequent years, your financial year will start on 1 July and end on 30 June of the following year.

Example for a company incorporated on 12 June 2023

Let’s say your company was incorporated on 12 June 2023. Often the first financial year can be a little unusual, as it can be more than 12 months.

1. The first financial year: Begins on the date of incorporation, i.e. 12 June 2023, and runs until 30 June 2024.
2. Subsequent financial years: After the first year, your tax year will be stable from 01 July 2024 to 30 June 2025, and so on each year.

Usually, your Company Tax Return is filed for the period of the Financial Year. In the first year, there may be two of them, as the financial year is longer than 12 months.

Financial and tax reporting periods can sometimes differ

Your financial year will be different from your tax year in the first year if you have not started trading (carrying on business activities) when you register. This is because in the UK we choose the date on which we start trading when we register. This date may be different from the date of registration. You can specify the exact date or leave it for the future.

A real-life example

Let’s say you registered a company on 12 June 2022, but didn’t start trading until 12 February 2023. Then:

• Your first financial year starts on 12 February 2023 and ends on 30 June 2024 (a period of more than 12 months). You will prepare one set of annual accounts. However, the tax period for the corporate tax return will be from 12 June 2022 to 11 February 2023 for the dormant period (the period from the date of registration to the start of operations) and from 11 February 2023 to 30 June 2024 for the trading period.
• Future financial years will run from 1 July to 30 June.

I hope this helps you to better understand the concept of the fiscal year!

Corporation Tax

Company tax, or corporation tax as it is also known, is the tax you pay on the profits of your company. Corporation tax is calculated and paid based on your accounting year, not your tax year.
First, you need to determine how much your business has earned in a year. From this number, you subtract the allowable expenses to get the net profit. You pay corporate tax on this net profit.

But remember that every company is entitled to a certain amount of tax relief, so make sure you take this into account. And, of course, try to avoid common mistakes, such as miscalculating expenses or failing to take advantage of tax breaks.

What are the rates of corporation tax in the UK?

In the UK, corporation tax rates can vary depending on your company’s annual turnover.

• For companies with a profit of up to £50,000, the tax rate will be 19%.
• For companies earning up to £50,000, the rate is 19%. If your company earns between £50,001 and £250,000, you will be in the ‘intermediate band’ where you can claim marginal relief (a reduction in the tax rate from 25% to 19%).
• And for those whose income exceeds £250,000, the tax rate is set at 25%.

When to pay corporation tax?

• Payment terms: Payment is made within 9 months and 1 day of the end of the tax year.

This depends on your tax year, which usually starts on the date of company registration. For example, if you register a company on 12 June 2023, your first tax year will end on 30 June 2024. The tax must be paid within 9 months and 1 day of the end of the financial year, i.e. by 31 March 2025.

When to file the corporation tax report?

• Deadline for filing the report: You must file your corporation tax return no later than 12 months after the end of the financial year. The corporation tax return is submitted to HMRC (Her Majesty’s Revenue and Customs) with the annual accounts.

For example, a company registered on 12 June 2023 will have a tax year from 12 June 2023 to 30 June 2024. The deadline for payment of corporation tax will be 31 March 2025 (9 months and 1 day after the end of the financial year) and the tax return must be submitted by 30 June 2025.

Here is a calendar for filing a report and paying corporate tax for an LTD company established, for example, on 12 June 2023:

It is essential that you consult with your accountant or tax advisor to avoid any errors or misunderstandings in the preparation and submission of reports.

Value Added Tax (VAT)

What is it?

This is a tax paid on the added value of goods and services sold by a business.

In the UK, the standard rate of VAT is 20%. This rate applies to most goods and services. But there are exceptions:

1. Reduced rate (5% ) – this VAT rate applies to certain specific goods and services, such as home heating or certain types of child car seats.
2. Zero percentage rate (0%) refers to specific categories of goods and services that are not subject to VAT. This includes many food items, books, children’s clothes and shoes, etc.
3. VAT-exempt – there are some goods and services that are fully exempt from VAT, including certain types of medical services and educational services.

You can read more about the rates for different products on the official website of the UK government.

Businesses are required to register for VAT if their turnover in the previous 12 months exceeds the threshold, which at the time of writing is £85,000.

Businesses registered as VAT payers usually file reports and pay this tax every quarter. But they can also opt for annual VAT reports, which summarize all activities for the tax year ending March 31. So, you will have more time to prepare and submit the report, but it is important to remember that you will still need to track and record all VAT transactions throughout the year to ensure the accuracy of the report. You can also choose a monthly reporting period, which is very beneficial for exporters.

When do I pay VAT and submit a VAT return?

• If you decide to stay with quarterly reporting, you should keep in mind the deadlines for filing these reports and paying tax: it is usually one month and seven days after the end of three months.
• If you have chosen the annual VAT reporting system, you will not need to submit quarterly reports. This means that you are obliged to file a report and pay VAT only once a year, for the entire annual reporting period, which lasts from April 1 to March 31 of the following year. You have up to 2 months after the end of the financial year to submit your report.

Here are the standard quarters and deadlines for submitting reports:

All reporting and tax payment deadlines will be indicated on your tax invoice. Don’t miss it! They are different for everyone. Depends on the fiscal year or period of registration as a VAT payer.

VAT must be paid by the same date as the report submission.

Please note that if the 7th day falls on a weekend or holiday, the deadline for submitting the report and paying VAT is postponed to the last business day before that date.

Failure to meet the deadlines for filing or paying VAT results in penalty points. If you exceed the threshold of penalty points, then you will be charged a fine of 200 pounds for each violation.

PAYE and National Insurance

If you have employees, you must deduct income tax and national insurance contributions from their salaries and submit the information to HMRC.

When to pay and submit the report?

• • Payment deadline: monthly, by the 22nd of the following month (or by the 19th if you pay by post).
  • Submission deadline: Monthly, by the 22nd of the following month (or by the 19th if you pay by post).

An example for your business:

• If you have employees, you must make these deductions every month, starting from the month you hired your first employees.

Reporting to Companies House

Companies House is the organisation responsible for registering companies and filing their accounts in the UK.

Annual Accounts

Annual accounts must be filed with Companies House within 9 months of the end of the financial year. These are detailed financial statements that include a balance sheet, profit and loss account and other financial information.

Annual Report

This is a general overview of your company’s activities, including details of the directors, company secretary and registered address. Deadline: within 28 days of the anniversary of the company’s registration.

Reports can be submitted online via Companies House ‘s website or by post.

We hope this article has helped you understand the world of tax and reporting for new entrepreneurs in the UK. If you have any further questions, please don’t hesitate to contact us!

I hope this information helps you plan the financial responsibilities of your new business!

Please note that these dates and requirements are subject to change, so always check the official websites for the latest information, and always try to prepare and submit all reports well in advance to avoid any penalties or late fees. We wish you every success with your business!