Corporation Tax is charged on the taxable profits of limited companies and certain organisations. The rate of tax depends on the level of profits earned during the accounting period.
Corporation Tax is calculated by reference to the Financial Year, which runs from 1 April to 31 March. If a company’s accounting period spans more than one Financial Year, profits must be time-apportioned so that the correct rates are applied to each period.
| Rate | Profits band (£) | Rate (%) |
|---|---|---|
| Small profits rate | 0 - 50,000 | 19 |
| Marginal rate | 50,001 - 250,000 | 26.5 |
| Main rate | Over 250,000 | 25 |
| Marginal relief fraction | 3/200 |
Where a company’s accounting period crosses 31 March, profits must be split between the relevant Financial Years based on time. Each portion of profit is then taxed at the rates applicable to that year.
This can affect:
Final tax liability
Timing of payments
Availability of reliefs
Careful calculation is required to ensure compliance with HMRC rules.
The Northern Ireland Executive has stated its intention to introduce a 12.5% Corporation Tax rate for qualifying businesses operating in Northern Ireland. This lower rate will apply once the Executive confirms that public finances are on a sustainable footing.
Specific conditions and eligibility rules will apply once implemented.
Corporation Tax is not just about applying a percentage to profits. The final liability can be affected by:
Group structures and associated companies
Capital allowances and investment timing
Loss relief and carry-forward rules
Dividend and salary planning
Marginal relief calculations
Small differences in planning can result in significant tax savings over time.
AppleGrow Financial Advisors support companies with:
Accurate Corporation Tax calculations
Strategic tax planning to reduce liabilities
Advice on profit extraction and dividends
Support with HMRC compliance and deadlines
Forecasting future tax exposure as your business grows
If you would like clarity on your Corporation Tax position or want to ensure you are paying no more tax than necessary, speak with AppleGrow today.
