Corporation tax forecast

What does it mean for your corporation tax if you have more than one company?

If you own more than one company, they might be classified as associated companies under HMRC rules. This happens when the same individuals control both companies or if they are financially linked. It’s important because it impacts how much corporation tax each company pays, as the tax thresholds are shared.

For example, if you own just one company, you’ll pay 19% corporation tax on profits up to £50,000, 25% on profits over £250,000, and a marginal rate for anything in between. But if you own two associated companies, those thresholds are split.

Understanding how these rules apply can help you plan for your tax liabilities more effectively.

If you need tax advice to understand this in more detail, email support@provestor.co.uk for information on how to purchase a tax consultation with one of our experienced property tax advisors.

Assessable Profit

The profit for the year, along with balancing charges and allowances, is used to work out the taxable profit – this is the amount your company will actually pay corporation tax on.

The 'profit for the year' or 'profit & loss account' takes the total profit or loss from the software’s P&L report and adjusts for items like depreciation. This provides an estimate of the company’s profits that will be reported to Companies House in the official accounts.

Balancing Charges

To calculate the actual profits that are taxable for corporation tax, certain items, like balancing charges, need to be added back. This typically includes things like depreciation and dividends, which may reduce profits in the full accounts but aren’t allowed as deductions when working out corporation tax.

Allowances

The allowances section typically subtracts capital allowances for asset purchases made during the year. While these don’t show up as deductions in the profit and loss (P&L) statement, they can reduce the taxable profit when calculating corporation tax.

Why are there multiple tax years of corporation tax shown?

Corporation tax is divided into tax years to account for any changes to tax rates or rules introduced by HMRC, which typically take effect from the start of the new corporation tax year on 1st April. This provides a breakdown of how corporation tax is calculated using different methods for various parts of the company’s financial year.