Quick Guide Contractor Limited Company Corporation Tax

In a Nutshell

Limited Company Tax

In a Sentence

A contractor has to pay tax and a contractor limited company has to pay tax - hopefully.

A director of a limited company has a duty in law to make as much money as possible for the company's shareholders. A business making a profit has to pay Corporation Tax (CT600), a contractor limited company falls under this tax regime.

Limited Company Tax Year

Your limited company tax year is independent of the calendar year. Though both are 12 months, the limited company tax year doesn't have to start on 1st January.

The tax rate your limited company has to pay depends on whether it is judged by HMRC to be a large or small company. It's probable that a one-man contractor limited company will be a ‘small' company; your accountant will advise you on this.

Small is Beautiful

Small limited companies pay less tax than large limited companies. Corporation Tax has to be paid nine months after the end of the limited company's year-end date.

If your contractor limited company has a year-end of June, then the tax is due by the end of April the next year. It's possible to pay bonuses, pay into a pension fund and make other payments to reduce your Corporation Tax.