- How is a company taxed?
- What is the rate of the Corporation Tax?
- How do I decide whether to trade as a sole trader or as a Company?
1 How is a Company Taxed? Companies pay Corporation Tax on the company’s profits which include both income and chargeable gains taken together.
A company’s income for tax purposes is calculated in accordance with Income Tax rules. All trading income earned in the accounting period less expenditures, wholly and exclusively incurred for the purpose of the business and capital allowances (tax depreciation) will give a taxable profit.
Chargeable gains are calculated in accordance with Capital Gains Tax rules. Disposal Value received less selling costs less the cost of acquisition will give the taxable gain or allowable loss.
Costs of acquisition include legal fees, agent fees and stamp duty.
Back to the top 2 What is the rate of Corporation Tax?There are three rates of Corporation Tax:
Rates effective:
- 12.5% for trading income
- 25% for non-trading income
Back to the top 3 How do I decide whether to trade as a Sole Trader or as a Company? Your own individual circumstances will dictate whether you should operate as a limited company or as a sole trader. In addition to the taxation issues you need to consider there are various other practical and legal matters which should be taken into account when setting up a company and on which you should seek professional advice.
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