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How much Corporation Tax will I pay?

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Corporation Tax is a tax on the profits of limited companies. The company (not HM Revenue and Customs) will work out how much Corporation Tax is payable on the profits.

What is the rate of Corporation Tax?

The small profits rate for corporation tax (companies with profits under £50,000) is 19%, and the main rate (companies with profits over 250,000) is 25% for the tax year 2024/25.

How do I work out my profits?

The profit calculated in the accounts is not necessarily the same as the profit on which Corporation Tax is calculated.

There may be some items which are not allowed for corporation tax purposes (your accountant will be able to help you with this).

In order to work out the profits on which corporation tax is payable, we will consider two steps:

Step 1: Adjust the profits from the accounts

  £ Explanation
Net Profit per Accounts 117,143 The profit before tax taken from the profit and loss account (income statement).
Add: Non-trading expenses 38,345 We add expenses which are not allowable as trading (business) expenses and have been included in the accounts. (See Which business expenses aren’t allowable? below for more information).
Less: Non-trading income 6,286 We deduct income which is not trading (business) income and has been included in the accounts. For example, income from property, interest received and profits from the sale of assets.
Less: Capital Allowances 62,413 We may be able to deduct capital allowances (see What are capital allowances? below for more information).
Adjusted profit 86,789 Then you have your adjusted profit.

Step 2: Calculate the total amount on which Corporation Tax will be paid

  £  Explanation
Adjusted profit 86,789 The adjusted profit is the figure we have calculated previously.
Less: Trading losses brought forward 6,000 Deduct any trading losses (unused) brought forward from a previous accounting period.
  80,789  
Add: Income from property 0 Add any income from property.
Add: Income after non-trading loan relationships 6,286 Add income from non-trading loan relationships, for most companies this will usually consist of bank and/or loan interest received.
Add: Chargeable Gains 0 Add chargeable gains. The most common examples are profits on the sale of shares, land and buildings and business assets.
  87,075  
Less: Charges on Incom 0 Companies can claim tax relief from qualifying charitable donations, by deducting the amount from its taxable profits, up to the extent that the taxable profits are reduced to £nil.
Profits chargeable to Corporation Tax 87,075 And finally, we have the profits chargeable to Corporation Tax.
Note that any dividends received are NOT included.

Use our Corporation Tax Calculator to find out how much you will pay for the current tax year.

When can I claim a capital allowance?

You can claim capital allowances on items that you keep to use in your business – these are known as ‘plant and machinery’.

  • Building under construction
    Buildings

    Unfortunately, buildings and alterations to buildings are deemed to be changes to the setting in which your business trades from and therefore capital allowances are not allowed. In order to claim capital allowances, the item being purchased has to be performing a function. Some items within modern buildings, such as air conditioning units, are deemed to be integral features and do qualify for allowances. It’s worth speaking to a professional to discuss the allowances available.

  • Two computer screens
    Computer equipment

    Computer equipment qualifies for capital allowances as these are deemed to be ‘plant and machinery’ and perform a function within the business. Where computer equipment has a particular short life you can elect to make a short life asset which effectively allows you to accelerate the allowances.

  • Cars parked
    Cars and other commercial vehicles

    Cars do qualify for capital allowances, where they are used in the business. Where there is private use then the allowance will be restricted each year, but only for unincorporated businesses as private use in a company is treated differently (under the benefit in kind rules). The rate of allowance on cars depends on the carbon dioxide emissions of the vehicle. Commercial vehicles such as vans qualify for capital allowances.

  • Surveillance camera
    Machinery, equipment, fixtures and fittings etc

    All of these qualify for capital allowances as all are deemed to perform a function within the business. The following counts as plant and machinery: Items that you keep to use in your business, including cars; costs of demolishing plant and machinery; Parts of a building considered integral, known as ‘integral features’ e.g lifts, escalators, water heating systems, air conditioning units, electrical systems; Some fixtures, e.g fitted kitchens or bathroom suites, fire alarms and CCTV systems; Alterations to a building to install other plant and machinery – this doesn’t include repairs.

Corporation Tax calculator

Use our handy interactive calculator to work out how much Corporation Tax you'll pay.

£

Please note the results on the screen are estimates only. 

Calculate

Which business expenses aren’t allowable?

Expenditure must be “wholly and exclusively” incurred for trading (business) purposes.

Expenditure is deducted from income in the profit and loss account; therefore if it is not allowable it must be added back.

Below are some common examples of expenditure which is disallowable for corporation tax purposes and must be added back:

Expenditure Explanation
Capital expenditure and depreciation Capital expenditure is the purpose or improvement of fixed assets. Fixed assets are large items which are not bought to resell. For example, motor vehicles, buildings, office and computer equipment. 
Entertaining Client entertaining is not allowable. Staff entertaining is allowable of incurred wholly and exclusively for business purposes, for example team building. 
Donations Political donations and charitable donations to national charities are not allowable. Always keep a note of charitable donations as they may be allowable as a charge on income (see How do I work out my profits above). 
Penalties and fines These are not allowable as they relate to breaking the law.
Legal fees Legal fees relating to capital items or breaking the law are not allowable. 

 

When do I pay Corporation Tax?

Any Corporation Tax due must be paid electronically by nine months and a day after the accounting period end.

For example – a company with a year-end 31 December 2023 must pay any Corporation Tax due by 1 October 2024.

Make sure to stay up to date with the corporation tax due date for the current tax year.

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