There are lots of guides and tools online to help you calculate the corporation tax that you owe but corporation tax calculations can be complex so it’s vital to ask your accountant to help you work out what corporation tax you owe and file your company tax return
How to calculate corporation tax
Under corporation tax self-assessment, you must carry out your own corporation tax calculation to work out how much corporation tax your company must pay.
Corporation tax calculations are based on the profits shown in your own financial accounts. These then need to be adjusted to take account of how corporation tax reliefs and allowances are handled for tax purposes. For example, your taxable profits will be calculated using capital allowances rather than depreciation on assets such as machinery, and without deducting any non-allowable expenses such as entertainment.
In simple terms, there are three key steps when calculating your corporation tax:
- Step one: create a profit and loss account including all of your sales income and any interest earned.
- Step two: calculate capital allowances - up to £200,000 of capital costs each year can be used to reduce the amount of profit liable for capital gains.
- Step three: calculate your overheads, business expenses and any other allowances. Expenses include salaries, accounting fees, materials, travel costs, insurance and office costs. These can be deducted from your earnings to calculate the profit your company has made.
Corporation tax dates and deadlines
You must pay any corporation tax due nine months and a day after the end of the corporation tax accounting year - before the deadline for filing your company tax return (which is due 12 months after the end of your company’s financial year). You must file a company tax return even if you have no corporation tax to pay.
How much is corporation tax?
From April 2017, the single rate of corporation tax is 19% on all profits. However, a higher rate of corporation tax is being introduced from April 2023:
- The small business rate of 19% continues to apply to profits up to £50,000.
- Profits over £250,000 will be taxed at 25%.
- Tapered rates will apply to profits between £50,000 and £250,000.
Using a corporation tax calculator
You can go online and use a simple corporation tax calculator to work out your corporation tax but it’s important to remember that these are basic tools that can only provide a rough estimate - because calculating corporation tax is a complex task.
Instead, most businesses use their accountants to prepare accounts, calculate taxable profits and file the corporation tax return. A good accountant will help minimise your corporation tax liability by ensuring you claim all the reliefs and allowances you are entitled to.