How do you work out how much corporation tax to pay?
Start with your company’s profit figure from your annual accounts. Statutory accounts are crucial in this process as they provide the necessary financial details for accurate tax calculations.
Then, you’ll need to add back any expenses that aren’t tax-deductible, such as client entertainment and depreciation.
Next, subtract capital allowances for business assets you’ve purchased. Don’t forget to apply any tax reliefs you’re entitled to, such as R&D tax credits if you’re working on innovative projects.
Company owners should also consider the tax implications of paying themselves in dividends, which are taxed at a lower rate than salaries.
The calculation differs slightly depending on whether you’re looking at trading income or property income. It's important to understand the differences in tax obligations for various business structures, such as income tax for sole traders and partnerships versus corporation tax for limited companies. Many businesses use accounting software to help get these figures right and avoid costly errors.
Accurate company accounts are essential for ensuring that your tax calculations are correct and submitted on time.
