Limited Company Tax: Everything Directors Need to Know

Running a limited company means dealing with several different taxes. Understanding what taxes your company owes—and when—helps you plan your finances and stay compliant with HMRC.

What Taxes Does a Limited Company Pay?

Your limited company may need to pay several types of tax:

Tax	What It's On	Who Pays
Corporation tax	Company profits	The company
VAT	Sales (if registered)	The company (collected from customers)
Employer's NI	Staff salaries	The company
PAYE	Employee wages	Collected by company, paid to HMRC
Business rates	Commercial property	The company

Let's look at each in detail.

Corporation Tax

Corporation tax is the main tax your limited company pays on its profits.

Current Rates (2023/24 onwards)

Profit Level	Tax Rate
Up to £50,000	19% (small profits rate)
Over £250,000	25% (main rate)
£50,001 to £250,000	19-25% (marginal relief applies)

Key Deadlines

Payment: 9 months and 1 day after your accounting period ends
Filing: 12 months after your accounting period ends

Example: If your company's year ends 31 March 2025:

Pay by 1 January 2026
File by 31 March 2026

Learn more in our corporation tax explained guide.

VAT (Value Added Tax)

VAT is a tax on sales. If your company is VAT-registered, you:

Charge VAT on your sales
Reclaim VAT on business purchases
Pay the difference to HMRC (or claim a refund)

Do You Need to Register?

Mandatory registration: If your taxable turnover exceeds £90,000 in any 12-month period, you must register for VAT.

Voluntary registration: You can register even if below the threshold. This lets you reclaim VAT on purchases, which can be beneficial if you sell to other businesses.

VAT Rates

Rate	Amount	Applies To
Standard	20%	Most goods and services
Reduced	5%	Some goods (e.g., home energy)
Zero	0%	Some goods (e.g., children's clothes, most food)

Filing VAT Returns

VAT returns are usually filed quarterly, though you can opt for monthly or annual schemes.

PAYE and National Insurance

If your company employs anyone (including you as a director), you'll need to run payroll and deal with PAYE.

What You Deduct and Pay

Tax	Who Pays	Rate
Employee income tax	Deducted from salary	Based on tax code
Employee NI	Deducted from salary	8% on earnings over £12,570
Employer NI	Company pays	13.8% on earnings over £9,100

Employer's National Insurance

This is a cost to your company on top of salaries. At 13.8%, it adds significantly to employment costs.

Example: If you pay an employee £30,000 salary, employer's NI is approximately £2,884.

Payroll Filing

Run payroll each pay period
Submit Full Payment Submission (FPS) to HMRC on or before payday
Pay HMRC monthly (or quarterly if small employer)

Director's Personal Taxes

As a director, you personally pay tax on money you take from the company:

Salary

Taxed through PAYE like any employee. The first £12,570 is tax-free (personal allowance), then you pay:

20% on £12,571 to £50,270
40% on £50,271 to £125,140
45% on over £125,140

Dividends

If you take dividends from company profits:

First £500 is tax-free (dividend allowance)
8.75% on basic rate band
33.75% on higher rate band
39.35% on additional rate band

Note: Dividends are paid from after-tax profits, so the company has already paid corporation tax on this money.

Most Tax-Efficient Strategy

Many director-shareholders pay themselves:

A small salary (around £12,570 or the NI threshold)
Dividends for additional income

This minimises National Insurance while using personal allowances. However, the optimal strategy depends on your specific circumstances.

Business Rates

If your company occupies commercial premises (office, shop, warehouse), you'll pay business rates to your local council.

Small Business Rate Relief

You may qualify for relief if:

Your property's rateable value is below £15,000
It's your only business property

Properties with rateable value below £12,000 pay no business rates at all.

Tax Planning for Limited Companies

Allowable Expenses

Reduce your corporation tax by claiming all legitimate business expenses:

Staff costs
Office rent and utilities
Professional services
Travel and subsistence
Marketing and advertising
Equipment and software

Capital Allowances

When buying business assets, claim capital allowances:

Annual Investment Allowance: 100% deduction on up to £1 million of qualifying assets
Writing Down Allowance: 18% or 6% for assets not covered by AIA

R&D Tax Credits

If your company does qualifying research and development, you may be able to claim R&D tax credits, reducing your corporation tax bill.

Filing Requirements Summary

Return	Deadline	Filed With
Company tax return (CT600)	12 months after year end	HMRC
Annual accounts	9 months after year end	Companies House
Confirmation statement	Annual	Companies House
VAT returns	Quarterly (usually)	HMRC
PAYE submissions	Each pay day	HMRC

Common Mistakes to Avoid

Missing deadlines: Late filing penalties add up quickly
Mixing personal and business: Keep company money separate
Not claiming expenses: Many directors miss legitimate deductions
Forgetting employer NI: Budget for this on top of salaries
Ignoring VAT threshold: Monitor turnover if approaching £90,000

Get Help with Your Company Tax Return

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