One of the most important challenges all businesses face is calculating and paying corporation tax. Here at Kirkwood Wilson, we help businesses across the country manage their finances. From payroll accounting to corporation tax services, we are well-equipped to teach you all you need to know about how corporation tax is calculated.
What is Corporation Tax?
Corporation tax is a tax that all UK-registered limited companies must pay according to their annual profits after overheads and expenses have been deducted. Understanding the corporation tax rates and how they should be calculated is essential to ensuring you pay the right amount to meet the requirements.
Unlike self-employed workers, limited companies will not have a tax-free personal allowance to help offset their corporation tax, meaning getting it right is even more important.
What Are the Current Corporation Tax Rates?
In 2025, the main rate of corporation tax for companies making profits of over £250,000 is at 25%; for those making profits under £50,000, the corporation tax rate is currently 19%. The rates have consistently remained at 25% and 19% since 2023.
All businesses with profit margins between £50,000 and £250,000 will be subject to the higher 25% tax rates; however, there are tax reliefs on offer called marginal relief. Marginal relief allows businesses to gradually increase their corporation tax rates from the small profit rate to the higher main rate.
How is Corporation Tax Calculated?
To work out your corporation tax without enlisting a tax accounting agent, you should take your overheads away from your total income, giving you your profit before tax. Then add back any depreciation or entertaining, and then deduct your capital allowances. This will provide you with your profit liable to corporation tax.
Once you have this figure, you can work out your tax due at 25% or 19%, depending on your profit margin.
When do you need to pay corporation tax?
Corporation tax payments are specific to your company. The payment is due nine months and one day after the end of your accounting period, which is typically 12 months long and ends when your company’s financial year ends.
How do you pay corporation tax?
Your corporation tax will be due in full or in instalments, depending on how much you owe. You can pay through mobile banking or online through GOV.UK. If you prefer, you can also pay in person at your bank or building society.
However you choose to pay, you will need to access your tax account to pay your corporation tax.
Common Mistakes to Avoid
Keeping track of all of your spending and the tax deadlines can be a challenge, but here are some common mistakes you can avoid making with careful planning.
Poor record keeping
One of the most common mistakes is not keeping track of your spending; when you come to pay your corporation tax, you may have missing months of the year or inaccurate records, making it next to impossible to calculate your liabilities properly.
Missing deadlines
The deadlines for corporation tax are strict, and once you miss a deadline, you will be subject to automatic penalties and interest charges. To ensure you meet these deadlines, keep them written down with reminders when the date gets close.
Failing to declare income
All taxable income must be declared; there is no wiggle room. If you spend company income, it must be tracked. Whether it’s earnings, employee benefits or even eligible reliefs, you cannot afford not to declare all of your income.
Investing in Professional Help
Put simply, trusting the professionals takes away the stress of organising your corporation tax. If you have a complex tax situation and need a quick and easy solution rather than working it all out yourself and likely making mistakes, you can trust an accountant or tax calculator to handle all of the figures to provide your exact tax rate.
Speak with a Kirkwood Wilson Accountant Today
If you are looking for support this tax year and want to enlist a professional accountant to see you through with your corporate tax payments, be sure to trust a Kirkwood Wilson specialist to deliver results. If you have any questions about corporation tax or if you want to hire one of our accountants, be sure to contact us, and a member of our team will be happy to help.
