UK Corporation Tax Calculator
Use our free UK Corporation Tax Calculator to calculate corporation tax for your
For most of our limited company clients, corporation tax is the largest single tax that they pay each year. It is paid annually based on the taxable profit taken from your company annual accounts and filed with HMRC using the Corporation Tax Return (CT600 form). Use our tax calculator here to determine how much corporation tax you will owe this year and estimate your total corporation tax liability. Corporation Tax is assessed and paid annually based on your company’s accounting period, which typically aligns with its financial year.
How to use our UK Tax Calculator:
1. Select your company year end. This is your accounting period end and is typically the last day of the month. If you are looking for a corporation tax calculator for the 2023/24 financial year, we can accommodate this too.
2. Turnover. This is how much you expect your business to invoice for the year. This includes all trading income. If you are VAT registered, ensure that your VAT is excluded from this figure.
3. Expenses. This one is usually a bit harder to estimate. If you have previous accounts and a CT600, then use the total net profit calculated in your last CT600 as a guide. Do not include any client entertainment costs. If you have purchased assets in the year, remove any depreciation from your expenses and replace it with the actual purchase cost of the asset. These are the most common adjustments we make for our ltd company contractor clients. If you are VAT registered on the standard rate scheme, then leave all VAT out of your calculations.
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What is Corporation Tax?
Corporation tax applies to UK limited companies and foreign companies with a UK branch or office (not sole traders). It’s charged on your company’s annual profits after allowable adjustments. Since 1 April 2023, the main rate is 25% for large companies with profits over £250,000. A small profits rate of 19% applies to small businesses with profits up to £50,000, with Marginal Relief applying between £50,000 and £250,000.
Use our corporation tax calculator to see your estimated bill and how the rules apply to you. Companies must file a Company Tax Return and pay corporation tax to HMRC each year.
How to Calculate Corporation Tax
For accounting periods ending on or before 31 March 2023, the rate was a flat 19%. For periods from 1 April 2023, profits up to £50,000 are taxed at 19%, profits over £250,000 at 25%, and Marginal Relief applies in between to taper the rate. The rate applies based on your total profits. If your accounting period spans 1 April, your profits are time-apportioned between the old and new rules. Our calculator handles this automatically.
Corporation Tax Calculation Steps
Calculating Corporation Tax involves several steps that help determine the taxable profits of a company, including trading income and chargeable gains. Here’s a step-by-step guide:
1. Determine the accounting period: The accounting period is usually the same as the company’s financial year. Identify the start and end dates to ensure accurate calculations.
2. Calculate net profit: Calculate the net profit of the company by subtracting total income and business expenses. This gives you the initial profit figure before adjustments.
3. Add back depreciation and client entertaining costs: Depreciation and entertaining costs are not deductible. Add these amounts back to the net profit to arrive at the profit before tax.
4. Calculate capital allowances: Calculate capital allowances on eligible assets, such as plant and machinery. These allowances reduce the profit before tax by the value of the assets.
5. Calculate taxable profits: Subtract the capital allowances from the profit before tax to determine the final taxable profits.
6. Apply the correct rate (or Marginal Relief): Tax profits up to £50,000 at 19%, profits over £250,000 at 25%, and use Marginal Relief to taper the effective rate for profits between £50,000 and £250,000.
When to pay Corporation tax
Corporation tax is usually paid in a single amount once every year. You are liable to pay based on the profit value derived by adjusting the profit before tax with various expenses. Typically, the due date to pay corporation tax is 9 months and one day following your company year end.
For example, if your company annual accounts were prepared to 31 October 2024, your corporation tax would need to be paid by 01 August 2025. When making payment to HMRC, ensure you use the correct payment reference number. This makes it easy for HMRC to match the payment to the correct company year end. The correct payment reference for each year is found in your HMRC business portal resources.
Allowed Expenses and Capital Allowances
Understanding allowable expenses and capital allowances is crucial for accurately calculating Corporation Tax and minimizing risk. Here’s what you need to know:
Allowed expenses: These are business expenses that can be deducted from taxable profits. Common examples include salaries, rent, and utility bills. Ensuring all allowable expenses are claimed can significantly reduce your corporation tax liability.
Capital allowances: These are deductions for the cost of certain assets which can be subtracted from taxable profits. Capital allowances can be claimed on assets like cars, vans, and equipment, providing tax relief over several years.
Claiming capital allowances: To claim capital allowances, you need to identify qualifying assets and calculate the allowable amount. This can help lower your taxable profits and, consequently, your Corporation Tax bill.
Associated companies: If your organisation is part of a group of associated companies, the limits for the small profits rate and Marginal Relief are divided by the number of companies. It’s important to understand these rules to ensure compliance.
Corporation Tax Filing Obligations
Companies have several filing obligations regarding Corporation Tax. Here’s what you need to know:
Company tax return: Companies must file a Company Tax Return (CT600) with HMRC within 12 months of the end of the accounting period. This return details the total income, expenses, and Corporation Tax liability.
Pay Corporation Tax: The payment is due within 9 months and one day of the end of the accounting period. Timely payment is crucial to avoid penalties and interest charges.
Abridged or filleted accounts: Companies must also file abridged or filleted accounts with Companies House within 9 months of the end of the accounting period.
Easy Digital Filing platform: Companies can access digital platforms to file their end-of-year returns for Corporation Tax and Companies House. This simplifies the service and ensures compliance with deadlines.
Ways to reduce your Corporation tax bill
There are very few reliefs or schemes available to our limited company contractor clients to help them reduce their corporation tax bill. The most common tax adjustments are made using capital allowances. These allowances allow you to reduce your taxable profit by the full purchase price of assets that you buy over the course of the company’s financial year.
What this means is you get tax relief for the full cost of the asset in the first year of purchase. There are conditions around this and it does not apply to all asset classes; however, for our clients, the vast majority of assets they purchase fall within the rules.
Otherwise, our most common advice to clients is to ensure they’re claiming all allowable expenses over the course of the company’s financial year, which will help reduce their net profit subject to tax. One common exception to this is client entertaining costs, which are not tax deductible.
Common Corporation Tax Mistakes to Avoid
Here are some common Corporation Tax mistakes to avoid:
Incorrect accounting period: Ensure that the accounting period is correct, as an incorrect period can lead to errors in the Corporation Tax calculation.
Incorrect capital allowances: Make sure capital allowances are claimed correctly. Miscalculations can result in either overpaying or underpaying Corporation Tax.
Incorrect taxable profits: Accurately calculate taxable profits by correctly adding back non-deductible expenses and claiming all allowable deductions.
Late payment: Pay Corporation Tax on time to avoid penalties and interest. Mark the due date in your calendar to ensure timely payment.
Incorrect company tax return: Complete the company tax return accurately. Errors can lead to incorrect tax liabilities and potential fines.
By following these guidelines and using our Corporation Tax calculator, you can ensure accurate and timely compliance with your Corporation Tax obligations.
In today’s changing tax landscape, you need an accountant you can trust. At No Worries, we’re here to help you thrive. Whether you’re a freelancer, contractor, or sole trader, we’ve got your accounting and tax needs covered. Seeking professional advice is key—get in touch—we’d love to help you crush your goals!
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