Corporation tax

The tax a limited company pays on its profits. Due nine months and a day after the year end, before the return is even filed.

What it means

Corporation tax is charged on a limited company's taxable profits — trading profits, investment income and chargeable gains. Taxable profit is not the same as accounting profit: depreciation is added back and capital allowances are deducted instead, among other adjustments.

Rates depend on the level of profit, with a small profits rate and a main rate and marginal relief between them.

Why it matters

The payment deadline comes before the filing deadline, which catches people out: the tax is due nine months and one day after the accounting period ends, while the return itself is not due for twelve months.

That means you have to estimate and set money aside long before anyone tells you the number.

What it looks like in practice

Put aside a percentage of profit monthly into a separate account. Most owners who do this never have a tax problem; most who do not, eventually do.

Check whether you qualify for reliefs — R&D tax relief and the Annual Investment Allowance are the ones small companies most often miss.

What to watch out for

Spending the tax money. It is the same failure mode as VAT and it is just as common.

Assuming a loss year means nothing to do. Losses can often be carried back or forward, and that only happens if the return is filed properly.

Where to get proper advice

Your accountant prepares and files the return. GOV.UK holds the current rates and deadlines.