Do limited companies need to pay income tax?

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Hello

I’ve been working as a sole trader for years, but have recently formed a new limited company. For years, I’ve paid income tax. I wonder, as a limited company, do I still need to pay income tax? Or will I be exempt from this?

Nathan Rahman

Answers

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Limited companies do not have to pay Income Tax on their profits - they pay 20% Corporation Tax (and sometimes VAT) on all taxable income. However, company directors pay Income Tax and National Insurance Contributions on their salaries. These deductions are applied by the company before the director receives his or her salary - the company then pays the appropriate tax and National Insurance is then paid to HMRC through PAYE.

In order to operate payroll through PAYE, you must register your company as an employer.

a year ago
 

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