Taxable Profits For Corporation Tax And How They Are Calculated

Taxable profits for Corporation Tax and how they are calculated

To work out how much Corporation Tax your company or organisation will have to pay, you need to work out the profits you'll have to pay tax on, known to HM Revenue & Customs (HMRC) as your 'taxable profits for Corporation Tax'.

To work out your taxable profits, you start with your company's pre-tax profit figure - sometimes known as 'profit before tax' - in your company's financial accounts for a financial year. You then:

  • Add back any depreciation charges you have included in your accounts
  • Deduct your capital allowances - they take the place of depreciation charges
  • Add any other relevant income or chargeable gains
  • Deduct any other relevant deductions, reliefs, allowances or losses

You then:

  • Apply the relevant tax rate(s) to calculate your gross Corporation Tax payable
  • Deduct any relevant tax credits and any Income Tax already deducted from interest income your company received - eg the tax deducted by your bank before it paid you interest

Finally, you deduct any Corporation Tax you have already paid - eg tax paid early - to find the amount of Corporation Tax you need to pay, or the amount of Corporation Tax you can claim back as an overpayment.

SMEs, businesses and companies in the UK are increasingly falling prey to corporation tax debt and are turning to our advice teams for assistance .We offer a range of solutions tailored to the tax needs of small business and companies. Contact us online using our online tax enquiry form or alternatively call us today.