So I owe nothing if I made no profit?
Right. Corporation Tax only ever lands on profit, the money your company has left after its genuine business costs. No profit means no Corporation Tax to pay that year. A loss is the same, there's nothing for HMRC to tax.
So the worry that a quiet or loss-making year leaves you with a tax bill out of nowhere is the wrong worry. The bill is £0. The thing that still needs doing is the paperwork, and that part trips people up.
If there's nothing to pay, do I still have to file?
Yes, and this is the bit to get right. You still send your Company Tax Return to HMRC even when you made a loss or have no tax to pay. The return is how you tell HMRC the figures and prove there's nothing owing. Skip it and HMRC doesn't see a company that owes £0, it sees a return that never arrived.
Once your company is up and running, HMRC asks you for a return each year. That request stands whether you made £100,000 or £0. Filing a nil or loss return is normal and takes the same path as any other, you just arrive at a £0 bill at the end.
Miss the filing deadline and HMRC adds a penalty, even when the tax itself is £0, because the penalty is for the late return, not for unpaid tax. A nil bill plus a late return still costs you money.
What's the difference between "no profit in my accounts" and a real loss?
These sound the same and aren't, so it's worth a moment.
Your accounts show profit as money in minus your costs. The figure the tax is worked out on, your taxable profit, starts from that but gets adjusted: a few costs you paid for real (taking clients out, the wear-and-tear figure on your equipment) get added back in for tax. That can nudge a break-even year back into a small taxable profit.
So "my accounts show no profit" doesn't always mean "I owe nothing". The figure that decides the tax is the taxable one, after those adjustments. That's exactly the sum we do for you, so you see the real answer instead of guessing from the accounts figure.
A genuine loss is when, even after those adjustments, your costs were bigger than your income. That's where the next part comes in.
What happens to a loss, is it wasted?
No. A loss is worth keeping, because it can cut the tax on a profitable year. You have a few options:
- Save it for the future (carry forward). You hold the loss and use it to reduce the tax in a later year when your company makes a profit, for as long as the business keeps trading. This is the common one.
- Push it back a year (carry back). You set the loss against the profit your company made in the previous 12 months, if it was running the same business then, and HMRC can refund tax you already paid. You have to ask for this within two years of the end of the loss-making year.
One catch links straight back to filing: you lock in a loss by claiming it on your Company Tax Return. No return, no recorded loss, and the saving you were owed for a future year can slip away. Filing a loss year is how you bank money for later.
A plain example
Say your company made a £5,000 loss in its first year. There's no Corporation Tax to pay, the bill is £0. You still file the return, and on it you record the £5,000 loss and choose to carry it forward.
The next year your company does better and makes a £12,000 profit. Because you saved that £5,000 loss, you knock it off first: you're only taxed on £7,000, not the full £12,000. At a 19% small-profits rate that's tax on £7,000 (about £1,330) instead of tax on £12,000 (about £2,280), so the saved loss put roughly £950 back in your pocket.
The figures are yours to check, but the shape is the point: file the loss year, and last year's bad result softens next year's bill. Don't file it, and that £950 never shows up.
How SimpleReturns handles a no-profit year
Connect your bank or upload a statement, and we add up the year's money in and out, work out your taxable profit (or loss), and tell you the real figure, including £0 when that's the answer. If it's a loss, we put it on the return so it's saved for a future year. Then we file the return for you, so a quiet year is fully covered and nothing is left hanging.