Tax & Insights

As a citizen of a country, it is one's responsibility to pay taxes. One of the most widely discussed tax topics as the New Year began was the UK government's plan to raise the corporate tax rate from 19% to 25% on April 20, 2023.What changes will this new corporation tax rate cause? And what can you do about it?

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Table of Contents

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• Corporate Tax

• Why All This Changes in Corporate Tax?

• Tax Specializations

• Final Thoughts

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Corporate Tax

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But first, what exactly is corporate tax?

According to Britannica, corporate tax is a tax levied on a corporation's net profits. The definition may be simple, but its concept might be confusing for some due to the complexity of this new tax policy. So, let's try to make it easier to understand!

Businesses sell goods and services in exchange for money, and the sales they make less their business cost will be the profit. With the profits of the company or corporation, the government can take the established percentage as a corporate tax. Resident companies in the UK have to pay corporate tax on their worldwide profits. Non-resident companies, on the other hand, are subject to UK corporation tax on the trading profits attributable to UK permanent establishments. Limited companies—a form of corporate structure where the firm is legally separate from its shareholders and managers—associated with trading profits, investments, and asset selling such as land, properties, and shares for chargeable gains have to pay corporate taxes as well, while sole traders and partnerships have to file a tax return and deduct income tax return on their profit.

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Why All This Changes in Corporate Tax?

Why did the UK government change the corporate tax rate for 2023? It is because of the status of the economy during the past years, caused mainly by the pandemic. The government sees this as an opportunity to pay the lost revenues and expenses during the COVID-19 pandemic. Besides, the UK's new corporate tax rate is just aligned with the corporate tax rate worldwide.

Here's the catch, though. Not everyone has to pay a 25% corporate tax. Beginning April 1, 2023, there will be no single corporation tax rate for non-ring-fenced profits, according to uk.gov. In addition to this, the government declared that the Corporation Tax main rate for non-ring-fenced profits would rise to 25% for profits over £250,000 in the Spring Budget of 2021. Fortunately, the corporate tax rate will remain at 19% for small businesses with profits of $50,000 or less.

What about those whose profits are between £50,000 and £250,000? In the article published by Wellers, the corporate tax for those in the marginal rate will be 26.5% by 2023/2024.

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Ring-fenced companies, which profit from oil extraction and UK rights, have different corporate tax rates than other companies. The following shows the corporate tax policies for these types of companies:

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• The corporate tax rate for small ring-fenced profits rate or those companies with profits under £50,000 is 19%.

• The corporate tax rate for main ring-fenced profits rate or those companies with profits over £250,000 is 30%.

• Marginal relief for ring fence companies with profits between £300,000 and £1.5 million will be available to claim for periods up to 31 March 2023 while marginal relief is available for companies with profits between £50,000 and £250,000 from April 1, 2023.

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Ring-fenced companies are not the only ones whose corporation tax rate is different from others. Other regimes have special corporation tax due to the size of the business, transfer pricing, R&D credits, and some targeted anti-avoidance rules, which will result in additional compliance and reporting requirements. As given by the Worldwide Tax Summaries, the following are the special corporation tax regimes:

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1. Oil and gas company regime (ring-fenced companies)

2. Life insurance company regime

3. Tonnage tax regime

4. Banking sector

5. Real estate investment trust (REIT) regime

6. Qualifying asset holding company (QAHC) regime

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Tax Specializations

Each regime has a distinct tax specialization. For instance, life insurance companies are subject to a unique tax system that has various rates for corporate taxes as well as unique guidelines for estimating or calculating their profits. On the other hand, the Tonnage Tax uses the net tonnage of active ships as a substitute measurement to calculate business tax gains. The Tonnage Tax profit replaces the chargeable gains/losses on Tonnage Tax assets as well as the tax-adjusted profit/loss on a shipping firm and some related operations. Having said that, any additional profits are subject to the standard corporate tax system.

Similarly, businesses in the banking industry must pay an extra 8% tax on income beyond GBP 25 million.

While QAHCs are permitted a stamp duty or stamp duty reserve tax (SDRT) exemption on the repurchase by a QAHC of share and loan capital, as well as the ability to redeem, repay, or repurchase its share through the capital treatment of payments in the hands of investors, profits from the UK REIT's "residual business," or activities other than renting out properties, are subject to corporation tax in the usual manner.

Due to the decision to change the corporate tax rate of the UK, Diverted Profits Tax (DPT), a part of the United Kingdom's response to the shift in the tax environment, is said to rise to 31% starting on or after April 1, 2023.

With no mention of reversal or change, it looks like the new 25% corporate tax rate is going to go ahead, so people need to know how to register for corporation tax and responsibility. To register for corporation tax when starting up a limited company, you need to go through the HM Revenue and Customs section of GOV.UK. You can now fill up the needed information. Corporation tax must be paid before filing the company tax return, which means that the deadline for payment depends on your corporation tax accounting period. Failure to settle the bill by the deadline dates can lead to penalties.

Apart from this, you may be able to lower your corporation tax bill by making use of strategies like the "Annual Investment Allowance," "The Patent Box Tax Regime," R&D tax relief, allowable business expenses, employee share scheme, and many other ways which you may learn about here.

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Final Thoughts

There will be several changes that this new corporate tax rate may bring, whether boosting federal revenues or causing negative impacts on certain businesses. However, those who are knowledgeable and can greatly adapt to these changes can withstand whatever the effects will be. Since the shift will most likely happen, then people must learn the things to do, such as registration, filing, and paying, and the strategies to use to reduce the corporate tax bill. Indeed, the tax environment is even more complicated than we've expected, but this complexity will surely continue as different corporations continue to evolve and as governments have distinct and certain priorities that can greatly influence how their tax policies will be shaped

The economy of the United Kingdom is a highly developed mixed economy, which is the sixth-largest national economy in the world. It is the second-largest economy in the European Union (EU) and the third-largest in the European Free Trade Association (EFTA). The United Kingdom has a strong and diverse economy supported by various industries, including finance, professional and scientific services, manufacturing, and tourism.

The financial services industry, which is centered in London, is a major contributor to the UK economy, as are the manufacturing, pharmaceutical, and automotive industries. The UK is also a major exporter of oil and gas. Despite its strong economic performance, it has faced a number of economic challenges in recent years. These include Brexit, which has had a significant impact on the country's trade and economic relationships, as well as the ongoing impact of the COVID-19 pandemic, which has led to significant economic disruption and job losses. The UK government has implemented a number of measures to support the economy during these challenging times, including fiscal stimulus, support for businesses, and temporary changes to employment regulations.

The country's economy has been affected by the global economic slowdown, as well as by domestic factors such as rising inflation and declining productivity. Despite these challenges, the UK's economy remains a key player on the global stage, and it is expected to continue to grow and adapt to changing economic conditions in the future.

The lockdown measures put in place to contain the spread of the virus have resulted in widespread job losses and a significant contraction of the economy. In the first quarter of 2020, the UK economy experienced its largest contraction, with GDP falling by 2% compared to the previous quarter. The services sector, which accounts for around 80% of the UK economy, was particularly hard hit, with businesses in the retail, hospitality, and leisure sectors being forced to close or significantly reduce their operations. The UK government has implemented a number of measures to support businesses and protect jobs, including the suspension of workers, which has helped to prevent widespread unemployment. However, the long-term economic impact of the pandemic is still uncertain, and it is likely that the UK will continue to face significant economic challenges in the coming years. Even though the UK has implemented measures such as lockdowns and social distancing restrictions to try to slow the spread of the virus, these measures have also had a negative impact on the economy.

The government implemented various measures to try to support the economy, including loans, grants for businesses, and increased welfare payments but the result of a pandemic on the economy is still uncertain and will depend on the success of efforts to control the virus and stimulate economic recovery so the government has outlined a roadmap for easing lockdown restrictions, but it remains to be seen how this will impact the economy.

The UK economy experienced its worst recession on record, with GDP falling by 9.9%. The country has also seen high levels of unemployment, with the unemployment rate rising to 5.1% in the third quarter of 2020.

There is a range of measures that governments and individuals can take to help mitigate the impact of the COVID-19 pandemic. These can be grouped into three main categories: public health measures, economic measures, and social measures.

Public health measures:

• Implementing and enforcing measures such as social distancing, mask-wearing, and quarantine to reduce the spread of the virus

• Testing and tracing to identify and isolate cases of the virus

• Vaccinating the population to reduce the number of cases and deaths from the virus

Economic measures:

• Providing financial support to individuals and businesses affected by the pandemic, such as through furlough schemes, business grants, and loans

• Implementing measures to stabilize financial markets and prevent a financial crisis

Social measures:

• Providing support to vulnerable individuals, such as the elderly or those with underlying health conditions

• Implementing measures to reduce the social and economic impact of the pandemic, such as through remote working or online education

Fast forward to today, the UK has demonstrated resilience in the face of the pandemic in a number of ways. One factor contributing to the UK's resilience has been the strong response from the government and central bank. The government has implemented a range of measures to support businesses and individuals affected by the pandemic, The Bank of England has also taken steps to support the economy, including cutting interest rates and providing additional funding to banks.

Another factor contributing to the UK's resilience has been the adaptability and strength of its businesses. Many businesses have been able to pivot and adapt to the changing circumstances brought about by the pandemic, such as moving to online sales or offering delivery services.

The UK has also benefited from its strong healthcare system and scientific community, which have played a key role in responding to the pandemic. The country has a well-established infrastructure for public health and research and has been at the forefront of efforts to develop and distribute vaccines.

Overall, while the pandemic has had a significant impact on the UK, it has shown resilience in the face of challenges through the actions of its government, businesses, and scientific community. It is difficult to draw a definitive conclusion about the overall impact of the COVID-19 pandemic on the UK economy at this time. The pandemic has had a severe impact on many sectors of the economy, leading to a recession in 2020 and a rise in unemployment. However, the government has implemented a range of measures to support businesses and individuals during the pandemic, and it is likely that some of the changes brought about by the pandemic, such as the shift to remote working, will have lasting effects.

Looking ahead, the UK economy is expected to continue to recover in the coming years, although the pace of recovery is uncertain and will depend on the evolution of the pandemic and the success of vaccination efforts. It is also expected that the economic recovery will be uneven, with some sectors recovering faster than others.

What is a Unique Tax Reference Number?

HMRC issues a unique taxpayer reference comprising ten digits (e.g., 0123456789) to all taxpayers, whether they are limited companies, self-employed individuals, or sole traders.

Personal UTR numbers are issued immediately after a self-employed individual files for self-assessment, while UTR numbers are given directly after incorporation. 

Why do I need a UTR Number?

UTR numbers are unique to the holder and, therefore used to identify a person or business for the purpose of taxation. Limited companies use UTR as a reference number when they are -

• Filing returns to HMRC;
• Communicating changes in their accounting period;
• Informing HMRC about changes in their registered details or company structure or

• Transitioning from active to dormant company.

Individuals on self-assessment use a UTR for reference when communicating to HMRC in the following instances —

• File a self-assessment tax return online or via post;
• Work with accountants or other financial advisors;
• Determine their tax bill and pre-pay taxes;
• Claim refunds;
• Track compliance with tax obligations; and
• Ensure accurate record-keeping for tax-related matters.

The reference number helps HM Revenue and Customs track earnings, calculate their liability, and monitor the fulfilment of tax obligations. 

How to Register for a UTR Number From HMRC as a Self-Employed Sole Trader

You will be issued a UTR number during self-assessment registration or when forming an LTD company. To enroll for self assessment with HMRC online, you’ll need a Government Gateway ID and password. If you do not have a business account, you can create one if you are -

• Self-employed as a sole trader
• A business partner, or 
• You need to pay for any other reason; for example, you earn income from a rental property. 

For any other reason, you’ll need to provide your full name, postal address, telephone number, and UK national insurance number and indicate why you are registering for self-assessment. 

To avoid fines, remember the deadline for when you must file returns. 

However, if you’ve ever registered but have not yet received your UTR number, contact HMRC directly through the self assessment helpline on 0300 200 3310. They will post it to you, and this takes around ten days. 

Take time to memorise your number, just like your National Insurance number, it’s yours for life.

How to find your UTR number online?

If you’ve forgotten your UTR number, there are several ways to retrieve it.

Most of your documents from HMRC will show your UTR number; refer to any tax returns letters you receive or forms such as a P60 or P45. Your corporation UTR number will also be printed on your payslip.

See if you can find your UTR number in any of the following resources —

• Get your registered name and number for a ltd company and request your corporation tax UTR online.
• Search through your online Self-Assessment account on the HMRC website.
• Check your “Welcome to Self Assessment letter” (Letter (SA250) sent by HM Revenue & Customs.
• In your “Corporation Tax Information for New Companies” letter (CT41G) sent by HMRC to the official company address 
• Any official correspondence, letters, or notices sent to you by HMRC, for instance, notices for tax payments or statements of accounts. 
• Previous self assessment, company tax returns and other documents. 

However, if you still can’t access previous tax documents (or you want to check your company UTR number), get in touch with HM Revenue & Customs through the self assessment helpline, and they’ll post it to you in 10 working days, or to the registered company address in case of a company utr number.

How do I get a UTR number if I am a Non-Resident?

The law requires non-residents to pay taxes on their UK earnings but not their foreign income. If you are a non-resident, you can apply for UTR through the Government Gateway with the necessary credentials. To get them, you’ll need to have lived in the UK at some point and at least have a National Insurance number (NINO). 

If you do not have NINO, it is possible to register for self-assessment using form SA1, used by those who need to register for UTR number for reasons other than self-employment. As you fill out the PDF, indicate the reason for not providing your NINO. 

Next, you will be asked why you must complete a tax return. Some of your options include if you are - 

• Receiving annual income from a trust or settlement;
• Earning an annual income of over £100,000;
• Getting untaxed income that cannot be collected through your PAYE tax code;
• Earning Income for Child Benefit purposes of over £50,000, and you or your partner is entitled to receive Child Benefit payments on or after 7 January 2013; and 
• Required to pay Capital Gains Tax to pay. 

If you have other reasons for completing your returns, you will be required to give the relevant details. 

Once you obtain a UTR number, you can create a Government Gateway account, sign up for HMRC online services, and file self assessment tax returns. 

For a non-resident company or a collective investment vehicle (CIV) that operates in the country or owns UK-based assets such as shares or land, you are liable to pay your company tax using form CT600 corporation tax return. To file your returns, you will need to provide the following details — 

• Company name (prior names if applicable), registered overseas address, and all contact details.
• Date of incorporation
• Name and addresses of directors
• The date you became liable for company tax 

How do I register for a Company UTR?

To record your company as “active” with HMRC for tax (this must be done within three months of starting any form of business activity or receiving business-related income), you’ll have to provide the following details:

• Company name and company registration number (CRN);
• Trading start date (this will determine the start date of your initial corporate tax accounting period);
• Main address where your business activities are active (this doesn’t have to be your registered office address);
• Outline your company’s principal activities (your SIC code will be needed here).
• The date your company accounts will be noted is also known as the “Accounting Reference Date (ARD).” It is the anniversary of the last day of the month of your business formation;
• Any other information on whether you’ve taken over an existing company/or are part of a group; and 
• Comprehensive details of all company directors (names, addresses, National Insurance number).

If applicable, any information regarding the appointment of an agent (accountant/tax advisor) who handles your company’s tax-related issues.

How long does it take to get a UTR?

How long it takes to get a UTR depends on your circumstances. 

• Individuals register for self assessment online and get their UTR number within ten working days. 
• Non-resident individuals with all the necessary documentation can get their UTR within 21 working days after enrolling for self assessment on the HMRC website. Non-UK resident landlords can register for the Non-resident Landlord (NRL) scheme by calling or writing to HM Revenue and Customs using the following details: 

• For a limited company registered with Companies House, HMRC will automatically get a notification of their formation and send their UTR number within 14 days of incorporation.
• Non-resident corporations must register for corporate tax within three months of becoming liable to pay UK corporate tax. If the corporation has a Government Gateway User ID, HMRC will send the code online. If not, the company will need to create an account and allow up to 8 weeks to process the registration and get access codes to your overseas address.

I lost my UTR number; what do I do?

For lost UTR, don’t worry. Simply look through your correspondence with HM Revenue & Customers. If you cannot trace it, you can call HMRC on 0300 200 3310 to ask about your number and +44 161 931 9070 for those outside the UK. HMRC cannot give your UTR number over the phone, but they’ll send it to you by post in 10 working days.

What is the difference between a UTR Number and a Tax Code?

A UTR number and tax code are tax-related numbers in the UK but for different purposes. A unique tax reference is a 10-digit number identifying an entity for taxation matters issued by Her Majesty Revenue and Customs (HMRC) to individuals or companies.

On the other hand, a tax code is used to identify employers, pension providers, and taxpayers within the context of withholding tax that combines numbers and letters with a distinct meaning. The numbers in a tax code represent the tax-free income an employee can earn in a year, while the letter reflects the employee's situation and how it affects the employee. Therefore, tax codes are not static (they change every year) and are not unique to individuals, and there are situations where two or more people with similar tax dynamics can have the same code.

Currently, the most common tax code is 1257L, which means you can earn up to £12,570 before HMRC requires you to pay your income tax. The letter L means the employee is entitled to the standard tax-free personal allowance. Other letters, such as M, mean the employee has received a transfer of 10% of your partner’s Personal Allowance.

What is a tax return?

Taxpayers must file annual returns with HMRC by post or online, declaring their income and any other relevant financial details helpful in calculating tax liability and scheduling payments or requesting refunds in case of an overpayment. The form is called self assessment because each individual is responsible for reporting their income.

What are the Self Assessment deadlines?

To not miss a deadline, you first need to know that tax dates do not go according to calendar years and are filed in arrears (for the previous year’s income). For instance, when submitting forms in 2023, you are reporting based on 2022 income.

The present tax year starts from April 6, 2023, to April 5, 2024, shortened as 2023/2024, and HMRC requires that self assessment returns be filed by October 5, 2024, if it was your first time filing. Midnight October 31, 2024, and January 31, 2025, are the deadlines for filing a paper tax return and online filing, respectively. HMRC also requires that you pay taxes you owe by January 31, 2025.

Who needs to file a self assessment Tax Return?

In the UK, most people pay tax at source in the form of PAYE (Pay as You Earn) and are not required to file for self assessment. However, according to HMRC, you must file a self assessment tax return (known as an SA100) if, during the tax year, you were -

• Self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on);
• A partner in a business partnership, a minister of religion, or a trustee;
• A resident or non-resident who earned over £2,500 in terms of an untaxed interest, rental income, commission, etc;
• Earned over £10,000 before tax in savings and investments or have You have an annual income of £100,000 or more before tax;
• You have capital gains income received by selling or giving away shares or any other relevant asset;
• Had a total taxable income of above £100,000; and
• Had to pay the High Income Child Benefit Charge.

If you need clarification on your situation, please write to us at info@capital-office.co.uk, and we will give you all the information necessary to make a sound decision.

How do I file a Self-Assessment Tax Return Online?

You can file online using form SA100 if you are self-employed and must submit returns for reasons such as receiving rental income.

However, to file returns for a —

• Partnership use the Partnership Tax Return (SA800);
• Trust or an estate files through the Tax and Estate Tax Return (SA900);
• Non-resident using the Residence, remittance basis, etc. (Self Assessment SA109);
• Report  chargeable events, such as the maturity of a life insurance policy, by filing the electronic flat text file specification (previously called magnetic media specifications) — for UK insurers only or the HMRC chargeable events spreadsheet;
• Minister of religion by supplementary pages SA102M; and 
• SA103L for Lloyd's underwriters. 

How do I pay my tax bill?

You can pay your self assessment tax bill by 31 January for taxes owed from the previous year through -

• Online or telephone banking (Faster Payments);
• Debit or corporate credit card online;
• Your bank or building society; 
• Your online bank account;
• CHAPS or Bacs

Note that HMRC’s banking address is:

What are the Self-Assessment Tax Bill Deadlines?

Submitting returns is complex; you must get the timing right to avoid penalties. Note taxation forms are not submitted based on calendar years but tax years and are filed in arrears (for the previous year’s income). For instance, if you are filing returns in 2023, you are filing for 2022 income.

How do you apply for a Company UTR number?

When you set up your LTD company, Companies House automatically sends a notification to HMRC to issue you with a Unique Taxpayer Reference (UTR) number.

What is the difference between a Tax Rebate and a Tax Refund?

Both terms refer to an after-tax refund a taxpayer receives after overpaying their tax invoice. The refund (rebate) refers to the sum you receive from the government when your taxes exceed your actual tax liability.

How do I file my first tax return online?

If this is your first time filing a tax return, begin by enlisting for self assessment. Complete the registration process online on the GOV.UK website. Once registered, you will be assigned a Unique Taxpayer Reference (UTR) number.

Next, gather documents such as P60, P45, and any other relevant tax paperwork. With your documents in hand, determine if you can file online or if you ought to use commercial software and follow the appropriate instructions. The deadline for submitting your tax return is midnight on the 31st of January, following the end of the tax year, and you should always expect to receive a confirmation from HMRC that they have received your return.

Any taxes you owe must be paid by midnight on the 31st of January following the end of the tax year. Various payment methods are available, including online, phone, or postal.

Remember, you can contact HMRC for support if you encounter any questions or require assistance with the tax filing process.