How Your Corporation Tax is Calculated

Calculating Taxable Profit

Taxable profit differs from net profit as in the profit and loss forecast. Figurewizard makes all of the changes needed to create taxable profit.

Depreciation and Capital Allowances

Because cash transfers do not take place for provisions such as for bad debts they are added back to net profit. Depreciation is a provision, so it too is added back to be replaced by capital allowances.

In their year of acquisition, fixed or non-current assets up to a value of £1 Million ex-VAT are entitled to an annual investment allowance (AIA) of 100%.

These will typically be office equipment, computers, fixtures and fittings, plant and machinery and commercial vehicles.

Property, company cars and computer software do not qualify for AIA: these are subject to lower written down allowances (WDA) over their lifetime.

Corporation Tax Rates Small Company

Taxable profits up to a maximum of £50,000 continue to be taxed at 19%.Taxable profits above £50,000 are taxed at 25%.

Profits from £50,000 to £250,000 however qualify for Marginal Relief.

How to Calculate Marginal Relief Simply

Marginal relief is calculated by a formula 3/200. For example with a taxable profit of £120.000 marginal relief is calculated as follows.

Marginal Relief Limit	£250,000
Taxable Profit	£120,000
Corporation Tax @ 25%	£30,000
Marginal Limit less Taxable Profit	£130,000
Divide That by 200	£650
Times 3 equals Marginal Relief	£1,950
Corporation Tax less Marginal Relief	£28,050

Paying Corporation Tax

For Companies with taxable profits up to £1,500,000, their tax is payable nine months from the end of your financial year plus one day’s grace.

Figurewizard, having calculated both the taxable profit and corporation tax due for you executes payment in the ninth month following your financial year-end.

Companies with profits greater than £1.5 million up to £20 million pay in 4 instalments: in 7, 10, 13 and 16 months from the start of the financial year, not the end.

Companies with profits greater than £20 million will pay in 4 instalments in 3, 6, 9 and 12 months,again, also from the start of the financial year.

forecast for year beginning the 1st.	May 2024	May 2025	May 2026
Corporation Tax Year - Period 1	2024	2025	2026
Corporation Tax Year - Period 2	2025	2026	2027
Corporation Tax Period 1 - Days	335	335	335
Corporation Tax Period 2 - Days	30	30	30

Net Profit before Tax	94,381	99,038	252,174
add: Depreciation	10,876	17,543	20,290
Adjusted Pre-Tax Profit Cfwd	105,257	116,581	272,464
less: Tax Losses Bfwd	0	0	0
less: Capital Allowances Period 1	30,849	17,658	22,729
less: Capital Allowances Period 2	2,763	1,581	2,035
add: Balancing Charge	0	0	0
Taxable Profit Cfwd Period 1	65,757	76,150	219,220
Taxable Profit Cfwd Period 2	5,889	6,819	19,632
Taxable Profit for the Year	71,645	82,969	238,852

Corporation Tax Rate - Period 1	25%	25%	25%
Corporation Tax Rate - Period 2	25%	25%	25%
Corporation Tax Charge - Period 1	16,439	19,037	54,805
Corporation Tax Charge - Period 2	1,472	1,705	4,908
Tax before Marginal Relief	17,911	20,742	59,713
Marginal Relief Period 1	2,455	2,300	153
Marginal Relief Period 2	220	206	14
Corporation Tax Payable	15,236	18,237	59,546

Tax Loss Cfwd	0	0	0

Report name: Sample Forecast

Forecast Corporation Tax

HMRC rules and how they work: An example of how Figurewizard calculates and applies your capital allowances, taxable profit, and corporation tax forecast.

Calculating Taxable Profit

Depreciation and Capital Allowances

Corporation Tax Rates Small Company

How to Calculate Marginal Relief Simply

Paying Corporation Tax