Corporation Tax Calculator
The UK government has announced an increase in Corporation Tax rates from 19% to 25% starting on 1st April 2023. This means that companies operating in the UK will now have to pay more taxes on their income above £50,000.
The change is part of a larger plan by the government to increase revenue and ensure sustainable economic growth. It affects businesses with taxable profits over £50,000 and could result in significant tax bills for many companies in the coming years.
To help businesses understand how this change could affect them, we’ve created a Corporation Tax Calculator to estimate your company’s potential tax liability.
What is Corporation Tax?
Corporation Tax is the tax that companies pay on their profits. It’s set by the government each year and calculated based on how much profit a company generates in any given financial year.
Income tax and National Insurance are paid through annual Self Assessment tax returns for self-employed.
HMRC Corporation Tax Rates
The Corporation Tax rate of 19% has been in place since 2017 but previously was at 30% in 2000. The government is introducing new rates from 1st April 2023, with rates from 19% to 25% for a company’s financial year.
The lowest rate of Corporation Tax of 19% is for companies with profits under £50,000.
The highest rate of Corporations Tax of 25% is for companies with profits over £250,000.
HMRC has introduced marginal relief for a company with profits between £50,000 and £250,000. Marginal relief provides a gradual increase in Corporation Tax as the profits increase.
How is Corporation Tax Paid?
Corporation Tax is reported on a Corporation Tax Return CT600 and filed with HMRC. The deadline for the tax return is 12 months after the end of the accounting period.
The Corporation Tax liability is due nine months and one day after the end of the accounting period. If your business has a 31st March year-end, the tax must be paid by 1st January of the following year.
You can pay Corporation Tax online using the HMRC, through online banking, phone, or direct debit.
How Can a Company Reduce Corporation Tax
The chancellor also announced a new scheme to incentivise businesses along with the recent rate increase. This includes every pound invested in IT, plant and machinery, which can be deducted from the taxable profits.
An example is that a business made profits of £100,000 but had invested £10,000 in new computer equipment. The Corporation Tax is, therefore, payable on £90,000.
Another way to reduce Corporation Tax is through research and development allowances (RDAs), patents, losses and creative media production, including films, TV, theatre and video games.
If you want to reduce the Corporation Tax through equipment, patents, creative media or research and development, it is advisable to seek advice from an accountant. They are aware of the rules and eligibility.
Complete guidance on Corporation Tax rates and allowances is available on the HMRC website.
How Does Our UK Corporation Tax Calculator Work?
You can use this Corporation Tax calculator to work out how much tax your company is due to pay based on the company profits before taxes.
Our limited company tax calculator will show the difference between the rate from 1st April 2023 and the previous rate of 19%. If the Company’s financial year falls across the 2 different rates, you must calculate how many days in each rate.
Enter the net profits before tax to calculate Corporation Tax.
Corporation Tax Calculator Conclusion
The new Corporation Tax changes can significantly impact businesses, so it is essential to understand how the rates could affect your company. Our UK Corporation Tax Calculator can help you estimate how much Corporation Tax is and plan for any additional payments that may be due.
Additionally, companies can reduce their Corporation Tax bills in several ways, such as investing in IT or plant equipment and taking advantage of research and development allowances.
To avoid penalties, always pay Corporation Tax on time. If you need further assistance understanding these rules or calculating your taxes, speak to your accountant.
See our other helpful business calculators.
