How Much Tax Does a Limited Company Pay in the UK?
Understanding how much tax a limited company pays in the UK is essential for business owners, contractors and entrepreneurs. While limited companies can be more tax-efficient than operating as a sole trader, it’s important to understand exactly what taxes apply and how they are calculated.
In this guide, we’ll explain how limited company tax works in the UK, what you can expect to pay, and how Akount can help you manage and reduce your tax bill legally.
What Taxes Does a Limited Company Pay?
A limited company in the UK typically pays several types of tax, depending on its activities.
The main taxes include:
Let’s break these down.
Corporation Tax
Corporation Tax is the main tax paid by limited companies on their profits.
This is paid to HM Revenue & Customs.
Corporation Tax Rates (UK)
As of recent tax rules:
19% for profits up to £50,000
25% for profits over £250,000
Marginal relief applies between these thresholds
Example
If your company makes £50,000 profit:
Corporation Tax at 19% = £9,500
Remaining profit after tax:
£40,500
This can then be distributed to shareholders as dividends or retained in the business.
Salary and PAYE
If you are a company director, you can pay yourself a salary through PAYE.
This involves:
These are also reported to HM Revenue & Customs.
Why Directors Take a Salary
Many directors take a small salary to:
Dividends
After paying Corporation Tax, you can take profits as dividends.
Dividends are taxed differently from salary.
Dividend Tax Rates
Dividend tax depends on your personal tax band:
8.75% (basic rate)
33.75% (higher rate)
39.35% (additional rate)
Example
If you take £20,000 in dividends:
VAT (Value Added Tax)
If your business turnover exceeds the VAT threshold, you must register for VAT with HM Revenue & Customs.
VAT Basics
VAT Example
If you charge a client £1,000 + VAT:
VAT = £200
total invoice = £1,200
You must pay the £200 to HMRC (minus any VAT you can reclaim).
National Insurance Contributions
If you pay salaries, you must also pay National Insurance.
This includes:
These are submitted through PAYE to HM Revenue & Customs.
How Much Tax Do You Actually Pay?
The total tax paid depends on:
Realistic Example
Let’s say your company makes £60,000 profit.
Step 1: Corporation Tax
approx. £11,400 (19%)
Remaining
£48,600
Step 2: Salary + Dividends
You take:
£12,570 salary (tax-free allowance)
remaining as dividends
Dividend tax is then applied based on your tax band.
This structure is often more tax-efficient than being a sole trader.
Allowable Expenses (Reducing Your Tax Bill)
One of the biggest advantages of a limited company is the ability to deduct expenses.
Common allowable expenses include:
Reducing your taxable profit means you pay less Corporation Tax to HM Revenue & Customs.
Common Mistakes to Avoid
Many business owners overpay tax due to simple mistakes:
Professional support can make a significant difference.
Is a Limited Company More Tax Efficient?
In many cases, yes.
A limited company can be more tax-efficient than a sole trader when:
However, it also comes with more responsibilities and administrative requirements.
How Akount Can Help
Understanding and managing your tax obligations can be complex—but that’s where we come in.
Akount provides expert accounting services designed to help you minimise tax and stay compliant.
Tax Planning
We help structure your income in a tax-efficient way, balancing salary and dividends.
Corporation Tax Management
We prepare and submit your corporation tax returns to HM Revenue & Customs.
Expense Optimisation
We ensure you claim all allowable expenses to reduce your tax bill.
VAT and Payroll
We manage VAT returns and payroll submissions to HM Revenue & Customs.
Ongoing Support
We provide ongoing advice to help you:
Final Thoughts
So, how much tax does a limited company pay in the UK?
The answer depends on your profits, structure and financial strategy-but typically includes:
With the right planning, a limited company can be a highly efficient way to run your business.
Speak to Akount Today
If you want to understand how much tax your business will pay. and how to reduce it legally, our team can help
Akount provides expert accounting and tax advice for limited companies across the UK.
Contact Akount today to take control of your business finances and maximise your tax efficiency.