Taking the leap to become a limited company is a major milestone for any Crawley business owner. It’s a sign of ambition and growth. This new structure gives you the powerful protection of limited liability, separating your personal assets from your business.

But with that power comes a new set of responsibilities, and the biggest of these is Corporation Tax.

Unlike the simpler world of a sole trader, a limited company is its own legal and tax entity. Understanding how it’s taxed, how to report to HMRC, and how to legally and efficiently pay yourself is crucial. Getting it wrong can be costly, but getting it right can save you thousands.

This guide will demystify Corporation Tax, explaining the CT600 form, and breaking down the art of tax-efficient profit extraction for directors in West Sussex.

Corporation Tax: A Quick Refresher

In simple terms, Corporation Tax is the tax a limited company pays on its annual profits.

"Profit" here is your company’s total income minus its allowable business expenses (like salaries, rent, and marketing). This excludes large 'capital' purchases like machinery, which are deducted via a separate system called capital allowances.

For the 2025/26 tax year, the rates are:

• 19% on profits up to £50,000 (the "small profits rate").
• 25% on profits over £250,000 (the "main rate").
• A tapering Marginal Relief applies to profits between these two figures.

It’s important to note that if you run multiple connected companies, these profit thresholds are shared between them.

Demystifying the CT600: Your Company's Annual Tax Return

This is the central document in your company’s tax life. Understanding its purpose and its deadlines is non-negotiable.

What is the CT600?

The CT600 is the official Company Tax Return form. It’s where you report your company's income, calculate your allowable expenses and tax reliefs, and declare your final Corporation Tax liability to HMRC.

Why is it important?

It is a legal requirement for all active limited companies. A correctly prepared CT600, supported by a full set of accounts, is the official record of your company's financial performance for the taxman. Accuracy is essential to remain compliant and avoid penalties.

When is it due?

This is a common point of confusion. There are two separate deadlines you must not miss:

1. The Payment Deadline: Your Corporation Tax bill must be paid 9 months and 1 day after your company's accounting period ends.
2. The Filing Deadline: Your CT600 and annual accounts must be filed 12 months after your accounting period ends.

Yes, you read that right. You have to pay your tax bill before you officially file the return. Missing the filing deadline will result in automatic penalties starting at £100.

How do you file it?

The CT600 must be filed online with HMRC, along with your statutory annual accounts in a special digital format known as iXBRL. This technical requirement makes DIY filing very difficult and is a key reason why using an accountant is essential for limited companies.

Getting Paid: A Director's Guide to Tax-Efficient Profit Extraction

As a director, you can’t just take money from the company bank account. You need a formal, tax-compliant way to move profits from the business to your personal account.

1. A Small, Tax-Efficient Salary The most common strategy is to pay yourself a small salary through a PAYE payroll system. The goal is to pay a salary high enough to count for your State Pension record, but low enough to be tax-efficient. For 2025/26, this means navigating a few key NI thresholds:

• Lower Earnings Limit (£6,396): Earn above this, and it counts as a qualifying year for your State Pension.
• Secondary Threshold (£9,100): If the salary is above this, the company starts paying Employer's National Insurance.
• Primary Threshold (£12,570): If the salary is above this, you start paying Employee's National Insurance.

On their accountant's advice, most directors opt for a salary between £9,100 and £12,570 to get the best balance of benefits.

2. Dividends Once you’ve taken your small salary, the most tax-efficient way to take further profits is usually through dividends. Dividends are a distribution of the company’s post-tax profits.

The key advantages are:

• You do not pay National Insurance on dividends.
• The tax rates are lower than Income Tax. For 2025/26, after a £500 tax-free allowance, the rates are 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate).
• Legal Formality: Dividends must be declared properly. This means holding a board meeting, recording the decision in the minutes, and issuing a dividend voucher for each payment.

3. Director's Loans (What to Watch Out For) A Director's Loan Account (DLA) tracks money moving between you and the company outside of salary and dividends. If you owe the company money at the year-end (an "overdrawn" DLA), you must be extremely careful.

HMRC has strict rules to stop directors using loans as a tax-free way of taking money. If the loan isn't repaid within 9 months and 1 day of your company’s year-end, the company could face a hefty Section 455 tax charge (33.75% of the outstanding loan). This tax is payable with your Corporation Tax bill and can only be reclaimed once the loan is genuinely repaid.

Your Corporation Tax Checklist

• ✅ Use cloud software like Xero: Keep immaculate digital records all year round.
• ✅ Create a tax pot: Set aside a percentage of your profit (a good starting point is 20-25%, but this will vary) in a separate savings account for your tax bill.
• ✅ Know your deadlines: Mark both your payment and filing deadlines in your calendar.
• ✅ Review your strategy annually: Your optimal mix of salary and dividends can change as your profits and personal circumstances evolve.
• ✅ Never use the company bank account for personal spending: This is what leads to messy Director's Loan Account issues.

Your Local Partner for Corporation Tax

Running a limited company in Crawley offers huge advantages, but managing Corporation Tax and profit extraction correctly is key to unlocking its full financial potential. The admin is more complex, but the opportunities for tax-efficient planning are far greater than for a sole trader.

If you’re a limited company director in West Sussex, let’s make sure you’re getting it right. Get in touch for a friendly, no-obligation chat today.