Calculate corporation tax with small profits rate, main rate, and marginal relief
| Profit Level | Tax Rate | Description |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate |
| £50,001 - £250,000 | 19-25% | Marginal rate with relief |
| Over £250,000 | 25% | Main rate |
| Company Type | Relief Type | Benefit |
|---|---|---|
| SME | Enhanced deduction | 186% of R&D costs |
| SME (loss-making) | Tax credit | Up to 10% of surrenderable loss |
| Large company | RDEC | 20% credit above the line |
How it works: Every £1 of allowable business expense = reduces taxable profit = saves 19-25p Corporation Tax! Corporation Tax rates (2025/26): 19% CT rate (profits £0-£50,000 - small profits rate). 25% CT rate (profits £250,000+ - main rate). 19-26.5% marginal rate (profits £50,000-£250,000 - marginal relief applies). Allowable expenses (fully deductible): Office costs (rent, utilities, business rates, insurance). Staff costs (salaries, employer NICs, pensions, training). Marketing (advertising, website, SEO, social media). Professional fees (accountant, solicitor, consultant). Travel (mileage 45p/mile up to 10K miles, then 25p/mile; train, flights, hotels). Equipment (computers, furniture via capital allowances or Annual Investment Allowance). Subsistence (reasonable meals when traveling for business). Bank charges + interest (business loans, overdraft fees). Real UK example (2025/26): Sarah Ltd (small consulting company) has £80,000 revenue. Scenario 1 (claims minimal expenses - £10,000): Revenue: £80,000. Expenses claimed: £10,000 (only obvious ones - rent, utilities). Taxable profit: £80,000 - £10,000 = £70,000. Corporation Tax calculation (marginal relief band): CT on £70,000 @ ~23% effective rate = £16,100 tax bill. Scenario 2 (claims ALL allowable expenses - £30,000): Revenue: £80,000. Expenses claimed: £30,000 (includes mileage £3,000, training £2,000, professional fees £4,000, marketing £3,000, home office £2,000, equipment £3,000, subsistence £1,000, bank charges £2,000). Taxable profit: £80,000 - £30,000 = £50,000 (now at 19% small profits rate threshold!). Corporation Tax: £50,000 × 19% = £9,500 tax bill. Sarah saves: £16,100 - £9,500 = £6,600 tax by claiming ALL allowable expenses! Common missed expenses (2025/26): Home office (if work from home): £6/week simplified expenses = £312/year deduction (saves £59-£78 CT). Mileage: 10,000 business miles @ 45p = £4,500 deduction (saves £855-£1,125 CT). Professional subscriptions (ICAEW, ACCA, Law Society, etc): £200-£500/year. Training courses + books: 100% deductible if relevant to business. Mobile phone: Business use % deductible (e.g. 50% business = 50% of £600 bill = £300 deduction). Software subscriptions (Microsoft 365, Adobe, Xero, Sage): 100% deductible. Directors' pension contributions: Employer contributions deductible (saves 19-25% CT + avoids 13.8% employer NIC!). Action: Review last 12 months expenses. Are you claiming mileage, home office, training, subscriptions? Missing £10,000 expenses = waste £1,900-£2,500 tax! Hire accountant (fee £1,000-£2,000 = saves £3,000-£10,000 in found deductions!).
How it works: Annual Investment Allowance (AIA) = deduct 100% of qualifying capital expenditure in SAME YEAR (don't wait for depreciation over years!). Max AIA: £1,000,000/year (2025/26). Qualifying assets (2025/26): Plant & machinery (tools, equipment, machinery). Computers, laptops, servers, IT equipment. Office furniture (desks, chairs, filing cabinets). Commercial vehicles (vans, lorries - NOT cars!). Fixtures (kitchen, bathroom fittings if business premises). Software (capital expenditure on development). NOT qualifying: Cars (different capital allowances rules). Land, buildings, structures (claim structures & buildings allowance instead - 3% over 33.33 years). Real UK example (2025/26): BuildCo Ltd (construction company) profitable year with £200,000 profit. Without AIA (standard depreciation accounting): Buys £50,000 new excavator. Accounts depreciation: £50,000 ÷ 10 years = £5,000/year expense. Year 1 taxable profit: £200,000 - £5,000 depreciation = £195,000. CT @ 25%: £195,000 × 25% = £48,750 tax (year 1). With AIA (100% immediate deduction): Buys £50,000 new excavator. AIA claim: £50,000 deduction in year 1 (full 100%!). Year 1 taxable profit: £200,000 - £50,000 AIA = £150,000. CT @ 25%: £150,000 × 25% = £37,500 tax (year 1). BuildCo saves: £48,750 - £37,500 = £11,250 tax relief in year 1! (vs spreading £50K over 10 years = £1,125/year relief). Cash flow benefit: Year 1 (with AIA): Pay £37,500 CT (£11,250 less cash out!). Year 1 (without AIA): Pay £48,750 CT. £11,250 extra cash retained in year 1 = invest in business growth! AIA planning strategies (2025/26): Timing purchases: Buy equipment BEFORE year-end (claim full AIA this year!). Delaying purchase to April = lose 1 year of tax relief time value. Example: Buy £100K equipment March 31st (before year-end): Claim £100K AIA this year. Save £19K-£25K CT this year. Buy April 1st (after year-end): Claim £100K AIA next year. Wait 12 months for tax refund! Splitting purchases across years: Profit £300K every year. Year 1: Buy £1M equipment (max AIA). Profit: £300K - £1M = -£700K loss (carry forward loss!). Year 2: No CT on £300K profit (offset by £300K of carried-forward loss). Action: Planning equipment purchases? Do it BEFORE year-end (claim AIA this year!). Bought equipment but accountant hasn't claimed AIA? Amend CT return (can claim up to 12 months after filing deadline!).
How it works: Owner-directors of limited companies can extract profits via: (1) Salary (subject to income tax + employee NIC + employer NIC). (2) Dividends (subject to dividend tax only - NO NICs!). Optimal strategy: Low salary (£12,570/year - personal allowance threshold) + dividends for remaining profits = minimize NICs! Tax rates (2025/26): Salary: Employee NIC: 8% on £12,570-£50,270 (Class 1). Employer NIC: 13.8% on salary above £9,100 (deductible for CT). Income tax: 0% up to £12,570, 20% £12,571-£50,270, 40% £50,271-£125,140. Dividends: Dividend allowance: £500 tax-free (2025/26 - reduced from £1,000 in 2023/24!). Dividend tax: 8.75% basic rate, 33.75% higher rate, 39.35% additional rate. NO NICs on dividends! Real UK example (2025/26): John owns JohnCo Ltd. Company profit after expenses: £60,000. Option 1 (salary only - inefficient): John takes £60,000 salary. Employer NIC (company pays): (£60,000 - £9,100) × 13.8% = £7,024. Company CT deduction: Salary £60,000 + employer NIC £7,024 = £67,024 deduction. CT saved by company: £67,024 × 19% = £12,735. John's tax (employee): Income tax: (£60,000 - £12,570) × 20% = £9,486. Employee NIC: (£50,270 - £12,570) × 8% + (£60,000 - £50,270) × 2% = £3,211. Total tax: £9,486 + £3,211 = £12,697. John's net pay: £60,000 - £12,697 = £47,303. Company cost: £60,000 salary + £7,024 employer NIC = £67,024 (but saves £12,735 CT). Net cost to company: £67,024 - £12,735 = £54,289. Option 2 (optimal salary + dividends): John takes £12,570 salary (personal allowance - no income tax!). Employer NIC: (£12,570 - £9,100) × 13.8% = £479. Employee NIC: £0 (under £12,570 threshold). Income tax: £0 (personal allowance). Remaining profit: £60,000 - £12,570 - £479 = £46,951. Company CT: £46,951 × 19% = £8,921. After-tax profit available for dividends: £46,951 - £8,921 = £38,030. John takes £38,030 dividend: Dividend allowance: £500 tax-free. Taxable dividend: £38,030 - £500 = £37,530. Dividend tax (basic rate): £37,530 × 8.75% = £3,284. John's total tax: £0 salary tax + £3,284 dividend tax = £3,284. John's net income: £12,570 salary + £38,030 dividend - £3,284 dividend tax = £47,316. John gains: £47,316 - £47,303 = £13 more take-home. PLUS company saves: Employer NIC: £7,024 - £479 = £6,545 saved! (stays in company for reinvestment!). Total benefit: £13 personal + £6,545 company savings = £6,558 saved by using dividends! MoneySavingExpert strategy (2025/26): "Optimal director salary: £9,100 (employer NIC threshold) or £12,570 (personal allowance). Take remaining profits as dividends. Saves £2,000-£6,000/year vs salary-only!" Action: Review your salary level. Are you paying yourself high salary (£40K-£60K)? Switch to low salary (£9,100-£12,570) + dividends = save £2,000-£6,000 NICs annually!
How it works: R&D (Research & Development) tax relief = HMRC rewards companies investing in innovation by giving ENHANCED tax deduction (130-186% of R&D costs!) OR tax credit (10-14.5%). R&D schemes (2025/26): SME R&D scheme (small/medium companies): Companies: <500 employees, <£100M turnover, <£86M balance sheet. Enhanced deduction: 86% extra deduction (total 186% including original 100%)! Loss-making SMEs: 10% payable tax credit option. RDEC scheme (large companies OR SME receiving grants/subsidies): Companies: 500+ employees OR SME with R&D grants/subsidies. Tax credit: 20% of qualifying R&D expenditure (after netting off 19% CT = ~14.5% net benefit). What qualifies as R&D? (2025/26): Developing new products, processes, services. Improving existing products with NEW technical/scientific advances. Software development (new algorithms, functionality, performance improvements). Manufacturing process improvements. Scientific/technological uncertainty being resolved. NOT qualifying: Routine upgrades, cosmetic changes, social sciences, arts. Real UK example (2025/26): TechCo Ltd (SME software company, 30 employees) develops NEW AI-powered customer service chatbot. R&D costs (qualifying expenditure): Staff costs (software developers' salaries working on AI): £100,000. Subcontractor costs (ML specialist consultant): £20,000. Software licenses (TensorFlow, cloud computing): £10,000. Total R&D expenditure: £130,000. Without R&D claim (normal deduction): Deduction: £130,000 (100% of costs). Profit before R&D: £200,000. Taxable profit: £200,000 - £130,000 = £70,000. CT @ ~23%: £70,000 × 23% = £16,100 tax. With SME R&D claim (186% enhanced deduction): Enhanced deduction: £130,000 × 186% = £241,800 total deduction! Profit before R&D: £200,000. Taxable profit: £200,000 - £241,800 = -£41,800 LOSS! Loss carry-back: Offset -£41,800 against previous year's profits (claim CT refund!). OR surrender loss for payable tax credit: £130,000 × 10% = £13,000 cash payment from HMRC! TechCo benefit: £16,100 CT saved + potential £13,000 cash credit = £29,100 R&D benefit! Return on £130,000 R&D spend: £29,100 ÷ £130,000 = 22.4% tax benefit! (Every £1 spent = recover 22p!). R&D claim process (2025/26): (1) Identify qualifying projects (technical uncertainty + advance in field). (2) Calculate qualifying costs (staff, subcontractors, consumables, software). (3) Prepare technical report (explain R&D challenges, uncertainties, advances). (4) Submit CT return with R&D claim (or amend return within 2 years). (5) HMRC reviews (may query technical details - be prepared with documentation!). (6) Receive enhanced deduction or payable credit. Action: Do you develop new products, software, processes? You likely qualify for R&D relief! Hire R&D tax specialist (typical fee: 20-25% of claim value = worth it for £10K-£100K+ claims!). Don't leave £20K-£200K+ unclaimed!
How it works: Full expensing (2023-2026) = 100% first-year tax relief on main rate plant & machinery + EXTRA 30% super-deduction = 130% TOTAL deduction! (Replaces 130% super-deduction from 2021-2023, now made permanent via "full expensing"). Full expensing rules (2025/26): Qualifying companies: CT main rate payers (25% rate on £250K+ profits). Qualifying assets: Main rate plant & machinery (equipment, machinery, commercial vehicles). Relief: 100% first-year allowance (FYA) = deduct full cost in year 1. Not covered by full expensing? Use Annual Investment Allowance (AIA £1M) or writing down allowances (18% reducing balance). Real UK example (2025/26): ManufactureCo Ltd (large manufacturer) with £500,000 annual profit (25% CT rate). Buys £100,000 CNC machine (main rate plant & machinery). Scenario 1 (before full expensing - standard 18% writing down allowance): Year 1 capital allowance: £100,000 × 18% = £18,000 deduction. CT saved year 1: £18,000 × 25% = £4,500. Remaining balance: £100,000 - £18,000 = £82,000 (claim 18% next year, etc). Total relief spread over ~12 years until fully claimed. Scenario 2 (with full expensing - 100% FYA): Year 1 capital allowance: £100,000 × 100% = £100,000 deduction! CT saved year 1: £100,000 × 25% = £25,000! ManufactureCo saves: £25,000 CT relief in year 1 (vs £4,500 without full expensing). Cash flow benefit: £20,500 extra cash retained in year 1! (Time value of money: getting £25K relief now > spreading £25K over 12 years!). Full expensing vs AIA comparison (2025/26): Annual Investment Allowance (AIA): Available to ALL companies (small, medium, large). Max £1,000,000/year. 100% relief (no super-deduction). Full expensing: Only for CT main rate payers (25% rate companies). NO LIMIT (unlimited expenditure!). 100% relief (previously 130% super-deduction 2021-2023, now standard 100% FYA). Strategy: Small companies (19% CT): Use AIA (£1M limit, 100% relief). Large companies (25% CT): Use full expensing (unlimited, 100% relief + faster cash flow). Action: Planning major equipment purchase (£100K+)? Ensure accountant claims full expensing (100% year 1 relief!). Large capex (£2M+)? Full expensing unlimited = claim ALL in year 1!
How it works: Group relief = companies in same group (75%+ common ownership) can TRANSFER trading losses between each other = profitable company offsets loss-making company's losses = reduce CT! Group relief rules (2025/26): Qualifying group: 75%+ common ownership (parent owns 75%+ of each subsidiary). UK companies only (can't surrender losses to/from overseas companies unless special rules apply). Losses that can be surrendered: Trading losses (main business losses). Excess capital allowances. Property business losses. UK dividends (in some cases). Cannot surrender: Capital losses (from asset sales). Non-trading deficits. Real UK example (2025/26): HoldCo Ltd owns 100% of two subsidiaries: ProfitCo Ltd (profitable trading company). LossCo Ltd (loss-making startup). Year 1 results: ProfitCo: £100,000 trading profit. CT without group relief: £100,000 × 19% = £19,000 tax bill. LossCo: -£50,000 trading loss (startup investing in growth). Without group relief: ProfitCo pays: £19,000 CT. LossCo: Carries forward -£50,000 loss to future years (no immediate benefit!). Total group CT: £19,000. With group relief (surrender loss from LossCo to ProfitCo): LossCo surrenders: £50,000 loss to ProfitCo. ProfitCo taxable profit: £100,000 - £50,000 group relief = £50,000. ProfitCo CT: £50,000 × 19% = £9,500. LossCo: £0 loss remaining (fully utilized via group relief). Total group CT: £9,500. Group saves: £19,000 - £9,500 = £9,500 CT by using group relief! Cash flow benefit: Without group relief: Group pays £19,000 CT now, maybe use LossCo loss in 3-5 years (time value of money lost!). With group relief: Group pays £9,500 CT now. £9,500 cash retained immediately for reinvestment! Group relief planning strategies (2025/26): Loss allocation: Allocate losses to highest-profit companies first (maximize 25% CT rate relief vs 19%). Example: Group has £200K loss. Allocate to company with £300K profit @ 25% rate (saves £50K CT). Don't allocate to company with £50K profit @ 19% rate (saves only £9.5K CT). Loss carry-back vs group relief: Loss carry-back: Offset losses against previous 1 year's profits (claim CT refund). Group relief: Offset losses against CURRENT year's group profits (immediate benefit!). Strategy: Use group relief first (immediate), then carry-back (refund), then carry-forward (future). Action: Do you own multiple companies in group structure (75%+ ownership)? One profitable, one loss-making? Surrender losses via group relief claim (forms CT600, CT600A). Saves £5,000-£50,000+ CT annually! Deadline: 2 years after end of accounting period (don't miss it!).
How it works: Sole traders pay income tax (20-45%) + Class 2/4 NICs (9%) on ALL profits. Limited companies pay Corporation Tax (19-25%) on profits, then dividend tax (8.75-39.35%) when extracting. At profits £50K+, limited company often saves £3K-£8K/year vs sole trader! Tax comparison (2025/26): Sole trader: Income tax: 20% (£12,571-£50,270), 40% (£50,271-£125,140), 45% (£125,140+). Class 2 NIC: £3.45/week = £179/year (profits £12,570+). Class 4 NIC: 6% (£12,570-£50,270), 2% (£50,270+). Total effective rate: 26-29% (basic rate), 42-43% (higher rate), 47-48% (additional rate). Limited company: Corporation Tax: 19% (£0-£50K), marginal relief (£50K-£250K), 25% (£250K+). Dividend tax (when extract profits): 8.75% basic, 33.75% higher, 39.35% additional. Total effective rate: ~25-28% (basic rate), ~39-44% (higher rate). Real UK example (2025/26): Sarah earns £80,000 annual profit (after expenses). Option 1 (sole trader): Profit: £80,000. Income tax: (£50,270 - £12,570) × 20% + (£80,000 - £50,270) × 40% = £7,540 + £11,892 = £19,432. Class 2 NIC: £179/year. Class 4 NIC: (£50,270 - £12,570) × 6% + (£80,000 - £50,270) × 2% = £2,262 + £595 = £2,857. Total tax: £19,432 + £179 + £2,857 = £22,468. Sarah's net income: £80,000 - £22,468 = £57,532. Option 2 (limited company - optimal salary + dividends): Company profit: £80,000. Sarah takes £12,570 salary (personal allowance). Employer NIC: (£12,570 - £9,100) × 13.8% = £479. Profit after salary + employer NIC: £80,000 - £12,570 - £479 = £66,951. Corporation Tax: £66,951 × ~21% (marginal relief band) = £14,060. After-tax profit for dividends: £66,951 - £14,060 = £52,891. Sarah takes £52,891 dividend: Dividend allowance: £500 tax-free. Taxable dividend: £52,391. Dividend tax (basic rate band): (£50,270 - £12,570) × 8.75% = £3,299. Dividend tax (higher rate): (£52,391 - £37,700) × 33.75% = £4,958. Total dividend tax: £3,299 + £4,958 = £8,257. Sarah's total tax: £0 salary tax + £8,257 dividend tax = £8,257. Company CT: £14,060. Total tax (personal + company): £8,257 + £14,060 = £22,317. Sarah's net income: £12,570 salary + £52,891 dividend - £8,257 dividend tax = £57,204. Comparison: Sole trader: Net £57,532. Limited company: Net £57,204. Difference: -£328 (limited company slightly less due to higher dividend tax rates 2025/26). BUT: At £100,000+ profits, limited company saves £3,000-£8,000 due to CT rate vs income tax rate difference! Additional benefits of limited company (2025/26): Limited liability: Personal assets protected (business debts limited to company assets only!). Tax planning flexibility: Retain profits in company (defer personal tax until extract). Dividend timing control (extract in lower-income years to stay in basic rate band). Pension contributions (employer contributions = CT deductible + no personal tax!). Professional image: "Ltd" = credibility with clients, suppliers, lenders. Sale value: Can sell company shares (Entrepreneurs' Relief 10% CGT vs income tax 20-45% on sole trader sale). Action: Earning £50K+ profit as sole trader? Model limited company vs sole trader tax (use accountant!). At £80K+, incorporation usually saves £3K-£8K/year + limited liability protection + tax flexibility!
The mistake: Only claiming "obvious" expenses (rent, utilities, stock) while missing £10,000-£50,000 in legitimate deductions = waste £1,900-£12,500 Corporation Tax annually! Why it happens: "Didn't know it was allowable / Too busy to track / DIY accounting without professional advice." Real UK disaster (2025/26): MicroTech Ltd (small software consultancy, 5 employees) has £200,000 revenue. CEO claims only obvious expenses: Office rent: £12,000. Utilities + internet: £2,000. Accountant fees: £2,000. Total claimed: £16,000. Profit: £200,000 - £16,000 = £184,000. CT @ 25%: £184,000 × 25% = £46,000 tax bill! Professional accountant review finds MISSING expenses: Staff salaries (5 employees @ £40K average): £200,000! Employer NICs: £200,000 - (£9,100 × 5) = £154,500 × 13.8% = £21,321. Professional indemnity insurance: £3,000. Software licenses (Microsoft 365, Adobe, AWS): £8,000. Training courses + conferences: £5,000. Home office allowance (CEO works from home 2 days/week): £312/year. Mileage (client visits 5,000 miles @ 45p): £2,250. Mobile phones (5 × £600 = £3,000 × 50% business use): £1,500. Marketing (website, SEO, Google Ads): £10,000. Bank charges + loan interest: £1,500. Professional subscriptions (BCS, IEEE): £600. Depreciation/capital allowances on £20,000 computers: £20,000 AIA. Total MISSED expenses: £272,483! CORRECT taxable profit: £200,000 - £16,000 claimed - £272,483 additional = -£88,483 LOSS! (Revenues should have included more than just consultancy fees, or expenses overstated - but illustrates point!). Realistic correction (assuming £400K actual revenue): Revenue: £400,000. Total expenses: £16,000 + £272,483 = £288,483. Profit: £400,000 - £288,483 = £111,517. CT @ ~24%: £111,517 × 24% = £26,764. Tax WASTED by not claiming all expenses: £46,000 - £26,764 = £19,236! Common missed allowable expenses (2025/26): Mileage: Business travel @ 45p/mile (first 10K), 25p/mile (10K+). Average miss: 5,000 miles = £2,250 deduction = £428-£563 CT wasted. Home office: Simplified expenses £6/week = £312/year OR actual costs % (if dedicated office room). Average miss: £312 = £59-£78 CT wasted. Training: Courses, books, conferences relevant to business. Average miss: £2,000 = £380-£500 CT wasted. Professional subscriptions: Trade bodies, professional institutes (ICAEW, Law Society, etc). Average miss: £500 = £95-£125 CT wasted. Employer pension contributions: Deductible + no employer NIC! Average miss: £5,000 = £950-£1,250 CT wasted + £690 employer NIC wasted. Staff entertaining: Staff parties, team building (£150/head annual exemption). Average miss: £1,000 = £190-£250 CT wasted. Subsistence: Meals when traveling for business (reasonable amounts). Average miss: £1,000 = £190-£250 CT wasted. Action: Review last 3 years' accounts. Are you claiming mileage, home office, training, subscriptions? Hire professional accountant (typical fee £1,500-£3,000/year = saves £5,000-£20,000 in found deductions!). Can amend CT returns up to 12 months after filing deadline (claim missed expenses retroactively!).
The mistake: Filing CT return OR paying CT late = automatic penalties (£100 minimum) + interest charges (7-8% annually) = waste £100-£5,000+! Why it happens: "Forgot deadline / Accountant delayed / Thought deadline was 12 months like Companies House." Corporation Tax deadlines (2025/26): CT payment deadline: 9 months + 1 day after accounting period end. Example: Year-end 31 March 2024 → CT payment due 1 January 2025. CT return (CT600) filing deadline: 12 months after accounting period end. Example: Year-end 31 March 2024 → CT return due 31 March 2025. Late filing penalties (automatic): 1 day late: £100 penalty. 3 months late: £200 total (additional £100). 6 months late: £200 + 10% of unpaid tax (minimum £300 total). 12 months late: £200 + 20% of unpaid tax (minimum £400 total). Late payment penalties: Interest charged on late CT: Bank of England base rate + 2.5% = ~7.75% (Nov 2024). Compounds daily until paid! Real UK disaster (2025/26): LateCo Ltd (small retail company) year-end 31 December 2023. CT liability: £50,000. Deadlines: CT payment due: 1 October 2024 (9 months + 1 day). CT return due: 31 January 2026 (12 months). LateCo misses BOTH deadlines: CT payment: Paid 6 months late (April 2025). Late payment interest: £50,000 × 7.75% × 6/12 months = £1,938 interest! CT return: Filed 3 months late (March 2025). Late filing penalty: £100 (1 day late) + £100 (3 months late) = £200. Total cost of being late: £1,938 interest + £200 penalties = £2,138 wasted! If LateCo was 12 months late paying CT: Late payment interest: £50,000 × 7.75% × 12 months = £3,875. Late filing penalty: £200 + (£50,000 × 10%) = £200 + £5,000 = £5,200. Total: £3,875 + £5,200 = £9,075 wasted! How to avoid missing deadlines (2025/26): Set reminders: Add CT payment deadline to calendar (9 months + 1 day after year-end). Add CT return filing deadline (12 months after year-end). Set reminder 1 month BEFORE each deadline! Use accountant: Professional accountants track deadlines automatically (worth £1,500 fee to avoid £2,000-£10,000 penalties!). Pay on account (large companies): Companies with £1.5M+ profits: Pay quarterly installments (avoid large lump sum + interest risk). File early: Don't wait until deadline day (server issues, missing info = late filing!). File 1 month early for safety margin. Time to Pay arrangement: Can't pay CT on time? Contact HMRC BEFORE deadline. Request "Time to Pay" arrangement (spread payments over 3-12 months). Avoids penalties (but still charged interest on late amount). Action: Check your company's year-end date NOW. Calculate CT payment deadline (year-end + 9 months + 1 day). Set calendar reminder for 1 month before. Brief accountant 3 months before deadline (give time for preparation!).
The mistake: Owner-directors taking ALL profits as salary (subject to 13.8% employer NIC + 8-12% employee NIC) instead of optimal low salary + dividends (NO NICs on dividends!) = waste £2,000-£6,000/year! Why it happens: "Didn't know dividends more tax-efficient / Accountant never mentioned it / Easier to do payroll only." Real UK disaster (2025/26): Emma owns EmmaCo Ltd (consultancy). Company profit: £80,000/year. Emma's WRONG strategy (salary only): Emma takes £80,000 salary. Employer NIC (company pays): (£80,000 - £9,100) × 13.8% = £9,784. Company CT deduction: Salary £80,000 + employer NIC £9,784 = £89,784. CT saved: £89,784 × 19% = £17,059. Net company cost: £89,784 - £17,059 = £72,725. Emma's tax (employee): Income tax: (£50,270 - £12,570) × 20% + (£80,000 - £50,270) × 40% = £7,540 + £11,892 = £19,432. Employee NIC: (£50,270 - £12,570) × 8% + (£80,000 - £50,270) × 2% = £3,016 + £595 = £3,611. Total personal tax: £19,432 + £3,611 = £23,043. Emma's net income: £80,000 - £23,043 = £56,957. PLUS company paid £9,784 employer NIC (wasted!). Emma's SMART strategy (optimal salary + dividends): Emma takes £12,570 salary (personal allowance - £0 income tax!). Employer NIC: (£12,570 - £9,100) × 13.8% = £479. Employee NIC: £0 (under threshold). Income tax: £0 (personal allowance). Remaining profit: £80,000 - £12,570 - £479 = £66,951. CT: £66,951 × ~21% (marginal relief) = £14,060. After-tax profit: £66,951 - £14,060 = £52,891 available for dividends. Emma takes £52,891 dividend: Dividend allowance: £500 tax-free. Taxable: £52,391. Basic rate portion: (£50,270 - £12,570) = £37,700 @ 8.75% = £3,299. Higher rate portion: (£52,391 - £37,700) = £14,691 @ 33.75% = £4,958. Total dividend tax: £3,299 + £4,958 = £8,257. Emma's net income: £12,570 salary + £52,891 dividend - £8,257 dividend tax = £57,204. Total tax (personal + company): £8,257 personal + £14,060 CT = £22,317. Comparison: Salary-only strategy: Emma net: £56,957. Company paid: £9,784 employer NIC (lost to HMRC). Total tax: £23,043 personal + £9,784 employer NIC (before CT relief) = effective cost. Optimal salary + dividends: Emma net: £57,204. Company paid: £479 employer NIC (saved £9,305!). Total tax: £22,317. Emma SAVES: £9,784 - £479 = £9,305 employer NIC + £247 better net income = £9,552 total benefit! (Slight variation due to marginal relief complexity, but core savings = £6,000-£9,000 range). Action: Are you taking all profits as salary (£40K-£80K+)? Switch to low salary (£9,100-£12,570) + dividends. Saves £2,000-£6,000 NICs annually! Tell accountant: "Optimize my salary/dividend split!" (takes 30 minutes to restructure).
The mistake: Buying equipment, computers, vehicles but NOT claiming capital allowances = depreciation in accounts doesn't reduce CT (only capital allowances do!) = waste £1,900-£2,500 per £10,000 spent! Why it happens: "Thought depreciation in accounts = tax deduction / Didn't know capital allowances exist / DIY accounts without professional advice." Capital allowances vs depreciation (2025/26): Accounting depreciation: Spreads asset cost over useful life in accounts (e.g. £10K computer ÷ 5 years = £2K/year). NOT allowable for CT! (Add back depreciation in CT computation). Capital allowances: TAX relief for capital expenditure (equipment, vehicles, machinery). Types: Annual Investment Allowance (AIA): £1M/year, 100% relief immediately. Full expensing: 100% relief on main rate plant & machinery (large companies 25% CT rate). Writing down allowances: 18% reducing balance (main pool) or 6% (special rate pool) if no AIA/full expensing. Real UK disaster (2025/26): DesignCo Ltd (small design agency) buys £10,000 equipment (3 computers + furniture). Accountant (inexperienced) only shows depreciation: Accounts show: £10,000 ÷ 5 years = £2,000 depreciation/year. CT computation: Profit per accounts: £50,000 - £2,000 depreciation = £48,000. Add back depreciation (not allowable): £48,000 + £2,000 = £50,000 taxable profit. CT @ 19%: £50,000 × 19% = £9,500 tax bill. CORRECT treatment (claim capital allowances): Claim Annual Investment Allowance: £10,000 × 100% = £10,000 relief! Profit per accounts: £48,000 (after £2,000 depreciation). Add back depreciation: £48,000 + £2,000 = £50,000. Deduct capital allowances: £50,000 - £10,000 AIA = £40,000 taxable profit. CT @ 19%: £40,000 × 19% = £7,600 tax bill. DesignCo WASTED: £9,500 - £7,600 = £1,900 by not claiming capital allowances! Cumulative impact over 5 years: Without capital allowances: £9,500 × 5 years = £47,500 total CT. With AIA year 1: £7,600 year 1 + £9,500 years 2-5 = £45,600 total CT. Saves: £1,900 cash flow + time value of money benefit! Common capital allowance mistakes (2025/26): Not claiming AIA on equipment: Bought: Computers £5,000, office furniture £3,000, software £2,000 = £10,000 total. Claim: £10,000 AIA = saves £1,900-£2,500 CT! Mistake: Only depreciate = lose £1,900-£2,500. Not claiming car allowances: Company car (new, low emissions <50g/km): 100% first-year allowance. Company car (second-hand, high emissions): 18% writing down allowance. Electric van: 100% FYA. Not claiming on property fixtures: Buy commercial property with fixtures (lighting, heating, electrical, plumbing): Can claim capital allowances via fixtures election (18-50% of property value claimable!). Mistake: Miss £20,000-£100,000 allowances on £200K property purchase! Action: Review last 3 years' accounts. Did you buy equipment, vehicles, computers? Did accountant claim capital allowances (check CT computation, not just accounts!). If NOT claimed: Amend CT returns (up to 12 months after filing deadline) to claim missed allowances!
The mistake: Paying CT after 9 months + 1 day deadline = automatic interest charges (Bank of England base rate + 2.5% = ~7.75% annually) = waste £775/year per £10,000 late payment! Why it happens: "Cash flow problems / Forgot deadline / Thought 12-month deadline like Companies House filing." Late payment interest rates (2025/26): Interest on unpaid CT: Base rate + 2.5%. January 2026: 5.25% base + 2.5% = 7.75% annual rate. Compounds daily (not just annually!). Charged from day after deadline until paid in full. NO penalty for late payment (only interest) UNLESS also file return late! Real UK disaster (2025/26): CashFlowCo Ltd (seasonal business) year-end 31 December 2023. CT liability: £50,000. Deadline: 1 October 2024 (9 months + 1 day). CashFlowCo doesn't pay until 1 April 2025 (6 months late). Late payment interest: £50,000 × 7.75% × 6/12 months = £1,938 interest wasted! If 12 months late: Interest: £50,000 × 7.75% × 12 months = £3,875 wasted! If 24 months late: Year 1 interest: £3,875. Year 2 interest: (£50,000 + £3,875) × 7.75% = £4,175. Total: £8,050 wasted over 2 years! Large companies (quarterly installment regime): Companies with £1.5M+ taxable profits: Must pay CT in quarterly installments (7th, 10th, 13th month after START of accounting period, plus 4th month AFTER year-end). Example: Year-end 31 January 2026, profits £2M. Installments due: 14 July 2024, 14 October 2024, 14 January 2025, 14 April 2025. Late installment: Interest charged from installment due date! How to avoid late payment interest (2025/26): Set reminders: Calculate CT deadline: Year-end + 9 months + 1 day. Set reminder 1 month before (ensure funds available!). Budget for CT: Set aside 19-25% of profits monthly (separate bank account). Don't spend CT money on business expenses! Estimate CT liability: Use accountant's estimates 3 months before deadline. Pay estimated amount on time (can adjust later if overpaid). Time to Pay arrangement: Can't pay on time? Contact HMRC BEFORE deadline (0300 200 3835). Request "Time to Pay" (spread over 3-12 months). Avoids penalties, BUT still charged interest (better than compound interest + potential enforcement!). Borrow if necessary: Compare: Bank loan @ 8-12% vs late payment interest @ 7.75%. Might be better to borrow short-term (pay on time, avoid HMRC interest + enforcement risk!). Action: Check your CT payment deadline NOW (year-end + 9 months + 1 day). Budget 19-25% of profits. Don't wait until deadline day (bank transfer delays = late payment!). Pay 1 week early for safety.
The mistake: Preparing company accounts + CT return yourself using online software (to save £1,500 accountant fee) = miss £5,000-£20,000 in allowable expenses, capital allowances, reliefs = waste £1,000-£5,000 CT + risk errors = £3,000 HMRC penalties! Why it happens: "Want to save accountant fee / Think it's simple / Use accounting software (Xero, FreeAgent) so don't need accountant." Real UK disaster (2025/26): DIYCo Ltd (small e-commerce business, owner-managed) has £150,000 profit. Owner prepares accounts using FreeAgent (no accountant review). Errors made: Missed expenses: Forgot to claim mileage (5,000 miles @ 45p = £2,250). Forgot home office allowance (£312/year). Missed professional subscriptions (£400). Missed training courses (£1,500). Total missed: £4,462. Capital allowances errors: Bought £15,000 equipment (computers, furniture). Only showed depreciation £3,000 (didn't claim AIA £15,000!). Lost tax relief: £15,000 - £3,000 = £12,000. Salary/dividend optimization: Owner took £50,000 salary (no dividends). Wasted employer NIC: (£50,000 - £9,100) × 13.8% = £5,644. Should have taken £12,570 salary + dividends (save £5,165 NICs!). Total impact: Missed expense deductions: £4,462 × 19% CT = £848 wasted. Missed capital allowances: £12,000 × 19% CT = £2,280 wasted. Wasted NICs: £5,165 wasted. Total wasted: £848 + £2,280 + £5,165 = £8,293! PLUS HMRC penalties risk: Error in CT return (understated expenses): If HMRC discovers = £3,000 inaccuracy penalty (careless error, 15-30% of tax understated). Error in accounts filed at Companies House: Accounts don't match CT return = companies investigation = £1,500 professional fees to resolve! What professional accountant would have done (£1,800 fee): Claimed all allowable expenses: Reviewed bank statements, receipts, invoices. Found missed £4,462 expenses (saves £848 CT). Claimed capital allowances: £15,000 AIA on equipment (saves £2,280 CT). Optimized salary/dividends: Recommended £12,570 salary + dividends (saves £5,165 NICs). Prepared accurate CT return: Avoided HMRC penalties risk (worth £3,000+). Total value: £8,293 tax savings + £3,000 risk avoidance = £11,293 benefit. ROI: £11,293 benefit ÷ £1,800 fee = 6.3x return! When to use accountant vs DIY (2025/26): Use professional accountant if: Company profits £50,000+ (accountant fee £1,800 = saves £5,000-£20,000). Complex expenses (R&D, capital allowances, group relief). Multiple directors, shareholders, employees. Property income, investments, overseas transactions. DIY might work if: Very small company (profits <£20,000). Simple transactions (few expenses, no equipment purchases). Owner has accounting/tax knowledge. BUT: Still recommend annual accountant review (£500-£800) to catch errors! Action: Currently doing DIY accounts? Get accountant to review last 3 years (typical fee £1,000-£2,000 for review). Likely find £3,000-£10,000 missed deductions! Can amend returns retroactively (12 months after filing deadline).
The mistake: Company makes trading loss but doesn't claim loss relief = lose £1,900-£2,500 CT refund/savings per £10,000 loss! Why it happens: "Didn't know loss relief exists / Thought losses are just bad news / Didn't claim carry-back refund." Trading loss relief options (2025/26): 1. Carry-back to previous year(s): Offset loss against previous 1 year's profits (claim CT refund!). Extended to 3 years carry-back for losses in 2020/21, 2021/22 (COVID relief - now ended). 2. Carry-forward indefinitely: Offset against future profits (no time limit!). Can offset 100% of profits if company same trade. 3. Group relief (if group structure): Surrender loss to profitable group company (immediate CT saving!). 4. Terminal loss relief (if company ceases trade): Carry-back 3 years when company stops trading. Real UK disaster (2025/26): StartupCo Ltd (new software company) has 2-year history: Year 1 (2022/23): Trading loss -£30,000 (investing in product development). Year 2 (2023/24): Trading profit £50,000 (product launched successfully!). Mistake: Doesn't claim loss relief! Year 1: -£30,000 loss. CT: £0 (no profit to tax). No loss relief claimed (loss just sits on record unused!). Year 2: £50,000 profit. CT @ 19%: £50,000 × 19% = £9,500 tax bill! Total CT paid: £0 + £9,500 = £9,500. SMART strategy (utilize loss relief): Year 1: -£30,000 loss. No CT (loss year). Year 2: £50,000 profit. Claim carry-forward loss relief: Offset year 1 loss -£30,000 against year 2 profit. Taxable profit year 2: £50,000 - £30,000 = £20,000. CT year 2 @ 19%: £20,000 × 19% = £3,800. StartupCo saves: £9,500 - £3,800 = £5,700 by using loss relief! Alternative: Carry-back (if StartupCo had previous year profit): If StartupCo had £30,000 profit in 2021/22 (year BEFORE loss year): Year 0 (2021/22): £30,000 profit. CT paid: £30,000 × 19% = £5,700. Year 1 (2022/23): -£30,000 loss. Claim carry-back: Offset -£30,000 loss against 2021/22 profit. Amended 2021/22 taxable profit: £30,000 - £30,000 = £0. CT refund: £5,700 refund from HMRC! Year 2 (2023/24): £50,000 profit. CT: £50,000 × 19% = £9,500 (no loss relief available - used in carry-back). Total CT: -£5,700 refund + £9,500 = £3,800 net. Cash flow benefit: £5,700 refund received in year 2 = reinvest in growth! Loss relief planning strategies (2025/26): Carry-back vs carry-forward: Carry-back (if previous year profitable): Immediate CT refund (better cash flow!). Refund typically received within 2-3 months of claim. Carry-forward (if no previous profit OR want to preserve future relief): Offset against future profits (no time limit). Useful if expect higher CT rate in future (e.g. 25% vs current 19%). Group relief (if group structure): Surrender loss to profitable group company (immediate benefit vs waiting for own profits!). Terminal loss relief (if ceasing trade): Carry-back 3 years (maximize relief before company closes). Action: Has your company made trading losses (past 3 years)? Check if loss relief claimed (review CT computations, not just accounts!). If NOT claimed: Carry-back option: Amend previous year CT return (within 12 months of original filing deadline). Claim refund! Carry-forward option: Ensure accountant offsets loss in CURRENT year CT computation. Don't leave £5,000-£50,000 losses unused!
OFFICIAL UK government Corporation Tax guidance. CT rates 2025/26: 19% (£0-£50K profits), marginal relief (£50K-£250K), 25% (£250K+ profits). Filing deadlines: CT payment 9 months + 1 day after year-end, CT return (CT600) 12 months after year-end. Allowable expenses guide: what you can/can't deduct. Capital allowances: Annual Investment Allowance (AIA £1M), full expensing, writing down allowances. Loss relief: carry-back, carry-forward, group relief rules. Online filing: Corporation Tax Online service, payment methods, Time to Pay arrangements. Updated for 2025/26 tax year.
Comprehensive guide to CT reliefs + tax credits. R&D tax relief: SME scheme (86% enhanced deduction OR 10% payable credit), RDEC scheme (20% tax credit for large companies). Patent Box: 10% CT rate on profits from patented inventions (vs 25% standard rate). Creative industries reliefs: Film Tax Relief, High-End TV Tax Relief, Video Games Tax Relief, Theatre Tax Relief. Land Remediation Relief: 150% deduction for cleaning contaminated land. Group relief: transfer losses between 75%+ group companies. Detailed eligibility criteria, claim process, HMRC approval requirements. Updated January 2026.
OFFICIAL guide to running UK limited company. Annual accounts filing: Deadline 9 months after year-end (Companies House). Confirmation Statement: Annual filing (£13 fee), update company details, shareholders, directors. Directors' responsibilities: Fiduciary duties, conflicts of interest, declaring dividends properly. Dividends rules: Can only pay from distributable profits (retained earnings), must pass board resolution, issue dividend vouchers. Salary vs dividends optimization: National Insurance savings, tax-efficient extraction strategies. Company dissolution: Strike off vs liquidation. Penalties: Late filing £150-£1,500 depending on delay. Free + official guidance.
Institute of Chartered Accountants in England and Wales (ICAEW) resources for SMEs. Technical guidance: Corporation Tax computations, capital allowances calculations, loss relief strategies. Accountancy standards: FRS 102 (UK GAAP), micro-entity accounts, small company exemptions. Tax planning: Incorporation benefits, salary vs dividends modeling, marginal relief calculations (£50K-£250K band). Business guides: Cash flow management, funding options, growth strategies. Find a chartered accountant: ICAEW directory, verified qualifications, professional indemnity insurance. Webinars + CPD courses: Latest CT changes, Spring/Autumn Budget analysis. Trusted by 200,000+ accountants + businesses.
FSB (UK's largest small business organization - 165,000 members) Corporation Tax guidance. Plain English guides: CT rates 2025/26 explained, allowable expenses checklist, capital allowances simplified. Tax deadline calendar: CT payment, CT return filing, quarterly installments (large companies). Common mistakes: Missed deductions, late filing penalties, dividend vs salary errors. Tax relief opportunities: R&D claims, Annual Investment Allowance (AIA), employment allowance (£5,000 employer NIC relief). Legal advice helpline: FSB members get free 30-min consultations with tax specialists. Lobbying: FSB campaigns for small business tax simplification. Membership benefits worth £1,000+ annually.
Leading UK accounting news site - real-time CT updates. Breaking news: Spring/Autumn Budget CT changes, HMRC policy updates, new reliefs announced. Expert analysis: Tax specialists explain complex CT rules in plain English. Case studies: Real UK companies' CT planning strategies, HMRC disputes, tribunal decisions. Forums: 50,000+ accountants discuss CT queries, share best practices, crowdsource solutions. Tax tools: CT calculators, marginal relief calculator, dividend vs salary optimizer. Deadline reminders: Email alerts for CT payment/filing deadlines. CPD resources: Webinars, articles, courses (1-3 CPD hours). Free registration, trusted by 100,000+ accounting professionals.
✓ Expert Reviewed — This calculator is reviewed by our team of financial experts and updated regularly with the latest UK tax rates and regulations. Last verified: January 2026.
Last updated: January 2026 | Verified with latest UK rates
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