Lower corporation tax bills for contractors from April 1st 2011

Limited company contractors will benefit from a cut in the small companies' Corporation Tax rate from 21% to 20% from April 1st 2011.

This will come as some relief to contractors, who will invariably have to pay more personal tax in the 2011/12 year due to the lowering of the the higher rate tax threshold, the 50% additional tax rate for incomes of £150,000 or more, and the stepped removal of the personal tax allowances for incomes above £100,000.

Corporation Tax returns also have to be filed electronically from 1st April 2011, and all payments made online. Your accountant should take these changes on board if you have a fully inclusive service.

The rate of Corporation Tax paid by larger companies (for profits of £300,000 per year and over) will also be cut by 1% to 27%, and will drop by an additional 1% each tax year until the 2014-15 tax year.

You can find out more about Corporation Tax via the HMRC website.