From the course: Understanding UK Business Finance and Tax

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Calculating corporation tax

Calculating corporation tax

From the course: Understanding UK Business Finance and Tax

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Calculating corporation tax

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Are you ready to do a few calculations? In this video, I'm going to explain how corporation tax is calculated for companies of varying sizes. So the first thing a company needs to do is prepare its accounts. And once that is done, it needs to make adjustments on non-allowable expenses so that it has the profits chargeable to corporation tax or PCTCT figure. This figure is multiplied by the appropriate corporation tax rate. At the time of recording in October 2023, the corporation tax rate for companies with profits less than £50,000 is 19%. The corporation tax for companies with profits of more than £250,000 is 25%. Anything between £50,000 and £250,000 is taxed at 25%, but marginal relief is available. This relief is equivalent to 3/200 of the amount up to the £250,000 threshold that's not being utilised. Let's go through a couple of examples. Company A has chargeable profits of £40,000. This is below the £50,000 threshold, and therefore, all the profit is taxed at 19%. The tax works…

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