Understanding corporation tax as a director

What corporation tax is and isn't

Corporation tax is a tax on your company's taxable profit — broadly, income less allowable costs and capital allowances. Crucially, it's charged on profit, not on the cash in your account, so you can owe tax on money already spent or tied up in unpaid invoices. That gap is exactly what catches directors out.

How it's calculated

You start with accounting profit, then adjust: add back disallowed costs, deduct capital allowances, and apply the rate to the result. Reliefs like the annual investment allowance can sharply reduce the bill in a year of investment. The detail is your accountant's job, but understanding the shape helps you plan the cash and see why financing an asset can also cut tax.

When it's due

For most small companies, corporation tax is due nine months and one day after the accounting year end, with the return filed within twelve months. Larger companies pay in instalments. Knowing your date lets you line the cash up — miss it and penalties and interest follow. Mark it in your cash flow forecast.

Budget for it as you go

The reliable fix for tax cash shocks is setting money aside as profit accrues — sweep a slice of each quarter's profit into a separate pot at your tax rate, so the bill is already funded when it lands. Directors who do this never scramble; those who don't often do. See how to budget for tax.

When you still need to fund the bill

Even well-run companies can face a tax bill in a cash-tight month. That's a timing problem, and short-term funding solves timing problems — pay HMRC on time and repay as cash arrives. Credicorp lends to the company, not to you personally, with no personal guarantee. See funding a tax bill.