Corporations and individuals are required to file tax returns to comply with the country's tax laws. However, the process of filing a Corporation Tax Return and a Personal Tax Return can differ significantly. In this article, we'll explore the differences between the two types of tax returns in the UK.
What is a Corporation Tax Return?
A Corporation Tax Return is a tax return filed by limited companies, partnerships, and other organisations that are considered to be separate legal entities from their owners. The Corporation Tax Return must be filed with HM Revenue and Customs (HMRC) within 12 months of the end of the accounting period. The accounting period is usually 12 months, but it can be longer or shorter.
The Corporation Tax Return includes information about the company's income, expenses, and profits, and it calculates the amount of tax that the company owes. The company must also provide details of any capital gains or losses and any allowances or reliefs that they are claiming.
What is a Personal Tax Return (self assessment)?
A Personal Tax Return is a tax return filed by individuals who are self-employed or have income from other sources that is not taxed at source. This includes income from rental properties, investments, and capital gains. The deadline for filing a Personal Tax Return is January 31st following the end of the tax year, which runs from April 6th to April 5th.
The Personal Tax Return includes details of the individual's income, expenses, and profits, and it calculates the amount of tax that they owe. The individual must also provide details of any capital gains or losses and any allowances or reliefs that they are claiming.
Key Differences between Corporation Tax Returns and Personal Tax Returns
The following are the key differences between Corporation Tax Returns and Personal Tax Returns in the UK:
Filing Requirements: Corporation Tax Returns must be filed by companies and partnerships, while Personal Tax Returns must be filed by individuals.
Accounting Period: Corporation Tax Returns are based on the company's accounting period, which is usually 12 months. Personal Tax Returns are based on the tax year, which runs from April 6th to April 5th.
Deadline: The deadline for filing a Corporation Tax Return is within 12 months of the end of the accounting period, while the deadline for filing a Personal Tax Return is January 31st following the end of the tax year.
Tax Rates: The tax rates for Corporation Tax and Personal Income Tax are different. The current rate for Corporation Tax is 19%-25% depending on your company profit, while the Personal Income Tax rates depend on the type of income you have and how much personal income you have earned in total.
Allowances and Reliefs: There are different allowances and reliefs available for corporations and individuals. For example, companies can claim capital allowances for investment in assets, while individuals can claim personal allowances and reliefs for expenses such as charitable donations.
In conclusion, while both Corporation Tax Returns and Personal Tax Returns serve the purpose of calculating tax liabilities, they differ significantly in their filing requirements, accounting periods, deadlines, tax rates, and allowances and reliefs available. It is essential for companies and individuals to understand these differences to ensure compliance with UK tax laws and to optimise their tax position.