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What The Corporation Tax Calculator Works Out
- Corporation tax: 19% on profits up to GBP 50,000, 25% from GBP 250,000, and marginal relief in between, worked out as 25% of profit minus 3/200 of the gap between GBP 250,000 and the profit. A GBP 100,000 profit pays GBP 22,750, an effective 22.75%.
- Profit after tax: what is left in the company for dividends, reserves or reinvestment once the tax is set aside.
- Associated companies: the GBP 50,000 and GBP 250,000 limits are divided by the number of companies under common control, so two associated companies each hit the main rate at GBP 125,000. This catches directors running side ventures through a second company.
- How it was worked out: shows which of the three regimes applied and the marginal relief figure where relevant. Taxable profit is accounting profit adjusted for the tax rules, so this is the shape of the bill rather than the bill.
- Marginal rate on the next GBP 1,000 (advanced): the tax on one more GBP 1,000 of profit. Inside the marginal relief band every extra pound is taxed at an effective 26.5%, higher than the main rate, which is exactly where pension contributions and capital allowances are worth most.
- Extra deductions (advanced): employer pension contributions, full expensing on qualifying plant, R&D relief or loss carry-forwards not yet taken off the profit. The card shows the tax they save and the average rate of relief.
- Accounting period length (advanced): the limits are pro-rated for periods shorter than 12 months, so a 6-month first period has a GBP 25,000 small profits limit. Periods over 12 months are split into two for tax.
- Profit sensitivity (advanced): re-runs the sum with profit a chosen percentage higher or lower, useful for seeing how a year-end bonus or pension payment moves the bill across the GBP 50,000 and GBP 250,000 lines.
- When the tax is due (advanced): 9 months and 1 day after the period end for most companies, earlier than the 12-month return deadline. Companies with profits over GBP 1.5 million (divided by associates) pay by quarterly instalments instead.
- Caveats: a simplified estimate. Not tax advice.
Source and further reading: GOV.UK (HMRC): Corporation Tax rates.