Corporation Tax & Small Business

In the UK, corporation tax is a charge that all businesses must pay on their profits. This tax is calculated at a set percentage of your taxable income and helps fund essential public services like education and healthcare.

For small businesses, corporation tax can be a daunting prospect. Read on to discover more about what corporation tax is, how it affects small businesses and how a business loan could help you manage it.

What is Corporation Tax?

Corporation tax is imposed on the profits of UK companies and organisations. These profits can come from selling goods or services, investing or lending money, or property rental income. Corporation tax is usually payable at 19%, although there are some exceptions for certain types of businesses.

Who Has to Pay Corporation Tax?

If you have a limited company that trades in the UK, you must pay corporation tax on your profits. You can register with Companies House in order to do this. If you are a sole trader, this is not necessary.

If your business is based outside of the UK but makes money from selling goods or services to customers in the UK, you may also be liable for corporation tax.

How Does Corporation Tax Affect Small Businesses?

The current rate for all small businesses is 19%, which has been the case since 2016.

Small businesses are often hit hard by corporation tax. This is because they tend to have smaller profit margins than larger businesses, so a greater proportion of their profits goes towards corporation tax. In addition, small businesses often don’t have the same level of access to accountants and other professionals who can help them minimise their corporation tax liability. As a result, small businesses can end up paying a lot of money in corporation tax every year.

Government Updates to Corporation Tax

Previously, Rishi Sunak announced that the government would raise corporation tax from 19% to 25%. The reasoning behind this was to help fund the government’s Covid-19 recovery plan. This announcement was met with some criticism, as people feared that this would deter businesses from investing in the UK.

Subsequently, Liz Truss’ government has backtracked on this decision. They announced in September’s mini-budget that corporation tax would remain at 19% for the foreseeable future. This benefits small businesses as they will not be facing a rise in their corporation tax bill, providing extra cash flow to spend on other aspects of the company.

As you can see, there have been several recent updates to corporation tax. It is important to stay up-to-date with these changes, as they can significantly impact your business. You could speak to a financial advisor if you have questions about how these changes might affect you.

Paying Your Corporation Tax

When paying your corporation tax bill, you have a few options available. The most common way is the Self-Assessment system. This involves completing a tax return and sending it to HMRC. Alternatively, you can use the PAYE system if you have employees. Your corporation tax will be deducted from your employees’ salaries before they receive them. You can also make voluntary payments toward your corporation tax bill if you want to get ahead of the game.

Financing Your Corporation Tax Bill

If you’re a small business owner struggling to pay your corporation tax bill, a business loan could be the solution you need. A business loan can supply you with the funds you need to pay your corporation tax bill, and it can also give you some breathing room to continue operating your business while you get your finances back on track.

If you’re thinking about taking out a business loan to help with your corporation tax bill, you can contact Love Finance for assistance with any funding needs.


We hope this blog post has helped to clear up some confusion surrounding corporation tax. Corporation tax can be complex, but with a bit of help, you can make sure that you are compliant and avoid any penalties. Remember, it is always best to seek professional advice if you are ever unsure about anything.