What Taxes Must Limited Companies Pay?

What Taxes Must Limited Companies Pay?

Quick Summary: UK Limited Company Taxes (2025 Guide)

If you run a limited company in the UK, here are the key taxes and duties you must manage in 2025:

• Corporation Tax: 19% to 25% depending on your profits, with CT600 filing and payment deadlines
  
   
• VAT: Register if turnover exceeds £90,000 and file returns using MTD-compliant software
  
   
• PAYE & National Insurance: Required for all salaries and director payments via payroll
  
   
• Business Rates: Applies if your company uses commercial premises
  
   
• Director Pay & Dividends: A strategic salary-dividend mix can reduce tax liability
  
   
• Self Assessment: Mandatory for directors taking income
  
   
• Making Tax Digital (MTD): Already required for VAT, expanding to income tax from 2026
  
   
• Payroll Management: Stay compliant and efficient by outsourcing or automating payroll
  
   
• Avoiding Penalties: Use cloud tools and work with an accountant to meet all deadlines
   

Late filings, inaccurate records, or missed payments can lead to fines and HMRC enforcement. At Yorkshire Tax Accountants, we help you stay compliant, tax-efficient, and stress-free.

Speak to us today for expert support.

What Are the Main Taxes a Limited Company Must Pay?

1. Corporation Tax

• Main rate: 25% for profits over £250,000.
• Small profits rate: 19% for profits up to £50,000.
• Marginal relief applies to profits between £ 50,000 and £ 250,000.
• Filing deadline: CT600 is due within 12 months of the end of the year.
• Payment due: nine months and one day after the end of the year.
• Reliefs include Annual Investment Allowance, R&D tax credits, Patent Box, and enhanced capital allowances.

For expert guidance, check out our corporation tax planning services.

2. VAT (Value Added Tax)

• Registration threshold: £90,000 in annual turnover.
• Standard rate: 20%, with reduced (5%) and zero-rate options.
• Eligible companies can use Flat Rate, Cash Accounting, or Annual Accounting schemes.
• VAT-registered businesses must file VAT returns using MTD-compliant software.

Our VAT services for limited companies make compliance stress-free.

3. National Insurance Contributions (NICs)

• The employer’s Class 1 NIC applies to salaries above the defined thresholds.
• Employee’s Class 1 NIC is deducted through PAYE.
• A PAYE scheme is mandatory for directors and employees.

4. Business Rates

• Applicable to commercial premises (offices, shops, warehouses).

• Small business relief may reduce or eliminate the liability based on property details.

  

   

What are Director & Shareholder Taxes

How to Pay Yourself from a Limited Company UK?

A tax-efficient pay structure usually involves:

1. A salary up to the NIC threshold.
2. Dividends are taken from post-tax profits.
3. An optional director’s loan with correct documentation.

This method maximises efficiency, especially with the £1,000 annual tax-free dividend allowance, and applicable dividend tax rates.

Do You Need to File a Self-Assessment?

Yes, directors must file a Self Assessment return if they receive a salary or dividends, and all dividend income must be declared.

Are There Any Additional Taxes & Compliance Duties

Making Tax Digital (MTD)

• Mandatory for VAT-registered companies.
• Set to include income tax requirements in the future.
• Requires HMRC-approved digital software, and professional guidance from a Making Tax Digital accountant ensures smooth compliance.

Capital Gains Tax (CGT)

• Company gains from selling assets (including property) are incorporated into corporation tax, not taxed separately.

Other Potential Taxes

• Residential Property Developer Tax may apply to business profits from property development.
• Construction Industry Scheme (CIS) rules apply if subcontractors are used.
• IR35 regulations are relevant for public-sector contracts.
• Industry-specific levies (e.g. Energy or Oil & Gas taxes) may be applicable depending on your business.

What Happens If You File Tax Returns Late?

Understanding the consequences of late filings can save you from costly penalties:

Late Filing Penalties: An Overview

Interest & Enforcement

• Unpaid tax accrues interest over time
• HMRC may enforce debt recovery, issue fines, or even dissolve the company

Tips to Avoid Penalties

1. Use cloud accounting tools to track deadlines and tax amounts
2. Budget regularly to ensure funds are available when taxes are due
3. Appeal penalties if delays were due to unavoidable issues (illness, tech failures)

4. Work with a professional accountant to ensure timely and accurate filing

    

   Have questions about your company’s tax obligations? Don’t guess — get in touch with Yorkshire Tax Accountants for expert, personalised advice.
    

Sole Trader vs Limited Company

How Can You Manage Payroll Efficiently?

Efficient payroll management is essential for compliance and team satisfaction:

Why Outsource or Use Payroll Software?

• Stay compliant with constantly changing tax laws and deductions
• Save time and money versus hiring in-house payroll staff
• Receive full-service support, including payslip generation, automatic reporting, and query handling
• Ensure accuracy and security, minimising errors and protecting confidential data

How Yorkshire Tax Accountants Can Help?

• Provide payroll services for small businesses in Yorkshire.
• Set up an HMRC-compliant payroll system.
• Manage PAYE and National Insurance seamlessly.

• Integrate payroll with Making Tax Digital tools.

   

What Are the Common Pitfalls & HMRC Penalties Involved?

• Late corporation tax results in a 5% surcharge one month after the due date.
• Delayed VAT/MTD returns carry penalties starting at 3% after 15 days, increasing to 10% after one year.
• Unreported dividends incur additional tax and interest.
• Incorrect payroll and NIC records may lead to fines and liabilities.

• Failure to comply with MTD may result in financial and procedural penalties.

  

  
   

Final Thoughts

In the UK, limited companies are responsible for corporation tax, VAT, National Insurance, and possibly business rates, capital gains tax, and other statutory obligations. With HMRC emphasising digital compliance and imposing stricter penalties, proactive tax management is key.

For expert guidance on Making Tax Digital, setting up tax-efficient pay, and meeting filing requirements, reach out to Yorkshire Tax Accountants, your trusted accountants for small business in Yorkshire.

Have questions about your company’s tax obligations? Don’t guess — get in touch with Yorkshire Tax Accountants for expert, personalised advice.

FAQs

1. What is the deadline for paying corporation tax?

Nine months and one day after the company’s financial year-end.

2. Should I register for VAT below the threshold?

It's optional, but it can allow you to reclaim VAT on business purchases

3. Can I pay only dividends and avoid tax?

No. HMRC requires directors to take a reasonable salary before distributing dividends.

4. Is Making Tax Digital mandatory?

Yes, for VAT-registered businesses. Compliance is expanding to more taxes soon.

5. How often should I review my tax structure?
 

At least annually, or when there are significant changes to business scale, profits, or payroll, your accountant can optimise planning accordingly.