Basically, business owners must pay a percentage of their profit to a jurisdiction.
The current corporation tax rate is 19 percent of the year, beginning on the first of April. However, there have been proposals to reduce it to 17 or 18 percent by next year.
Sometimes, though, you may not have generated enough revenue to pay off your legal dues for the year. Fortunately, you can take out corporation tax loans to help you get by and avoid hefty late payment penalties.
Here are the essential things you need to know about corporate tax loans:
All businesses operating in the UK are subject to pay corporation tax. There are tax calculators available online, but you should also know the factors that affect how much you end up paying the government. There are two steps in the process. First, you have to adjust your profits then calculate the total amount to get the corporation tax.
As an example, let’s say you have a net profit of 118,000 GBP. You have to add non-trading expenses, the income you earned from your properties and non-trading loan relationships, and chargeable gains. Deductions include the amount from your non-trading revenue, which is the profit you get from property, interest received, and gains from asset sales, and capital allowances or tax relief (more on that in the next number).
Afterward, it’s as easy as getting 19 percent of 90,000 GBP, which is 17,100 GBP. This is the corporation tax you have to pay for the year.
Tax relief pertains to the expenses you incurred for the operation of your business that you and your employees get personal use from. You can also claim capital allowances when you purchase assets that are used for your company, like machinery and business vehicles.
Other reliefs that you may claim include:
Knowing how much you should pay, including the deductions you can claim from tax reliefs, can help you make the right decision in choosing a loan. Before your request to borrow can be approved, you have to be eligible for the program first.
Do your research on the qualifications set by various lenders to ensure that you meet their requirements. Avoid applying to all creditors and banks because this can affect your credit score. It also helps if your rating is within the ideal range to assure lenders that you’re financially responsible.
One way to improve your credit rating is to build your credit history. Little or no debt can be taken against you because lenders can’t evaluate your reliability as a payer. Also, make sure to pay your dues on-time and in-full each month to prove to these institutions that you can responsibly handle debt.
Lastly, maintain your credit utilisation, which is the ratio of how much you consume from your limit. If you have a limit of 20,000 GBP and you only use up about 5,000 GBP a month, your credit utilisation score would be 25 percent. A lower percentage is more favourable.
Corporate tax loans are valuable in helping you avoid hefty penalties imposed on late tax payments. You may get a better deal when you borrow money to pay your legal dues because you can repay your debt in a monthly arrangement.
You just have to know precisely how much your corporation tax is and check if you qualify for tax relief. Then, review the requirements that you need to comply with and remember to check your credit score for faster approval.