UK Corporation Tax: A Practical Guide for Accountants
Corporation tax is charged on UK company profits. This guide covers rates, computing taxable profits, capital allowances, loss relief, R&D reliefs, and the main compliance obligations.
Corporation tax affects every UK company, yet the gap between accounting profit and taxable profit catches out many finance teams. Understanding the key adjustments — capital allowances, loss relief, R&D claims — is essential for accurate tax provisioning and effective cash flow planning.
Rates and Thresholds
From April 2023: 25% main rate applies to profits above £250,000; 19% small profits rate applies to profits up to £50,000; marginal relief operates between the two thresholds. Both thresholds are divided by the number of associated companies — a group of four companies each has a £62,500 small profits threshold.
Computing Taxable Profits
Start from accounting profit before tax. Add back: depreciation and amortisation (replaced by capital allowances); entertaining; fines and penalties; and other disallowable items. Deduct: capital allowances; qualifying R&D expenditure; and any loss relief being utilised. The result is the taxable trading profit.
Capital Allowances
Capital allowances replace depreciation for tax. The Annual Investment Allowance (AIA) gives 100% first-year relief on most plant and machinery up to £1 million per year. Full Expensing (introduced April 2023, made permanent in 2024) gives 100% relief on qualifying new main-rate plant for companies. Assets not covered enter pools: 18% writing down allowance (main pool) or 6% (special rate pool for long-life assets and integral building features).
Loss Relief
Trading losses can be offset against total profits of the current period, carried back one year against prior profits, or carried forward indefinitely against future trading profits of the same trade. Group relief allows profitable companies to claim losses from loss-making group members — a powerful tool in corporate tax planning.
Compliance Deadlines
File the CT600 within 12 months of the accounting period end. Pay tax within 9 months and 1 day (small companies) or quarterly for large companies. Penalties for late filing and late payment are automatic — diarise these dates.
Further Reading
Study with Learnsignal: Tax CPD for qualified accountants. Browse CPD.
This page was last updated:
Learnsignal Education Team
Expert Tutor at Learnsignal
Qualified professional with years of experience in teaching and helping students achieve their accounting qualifications.
View all posts by Learnsignal Education Team
