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Estimates UK corporation tax across the 19% small-profits rate, 25% main rate and the marginal-relief band between.
Step 1: Estimate the rate you'll pay
Work out roughly which band you are in — the 19% small-profits rate below £50,000, the 25% main rate above £250,000, or marginal relief in between. Use the corporation tax calculator to estimate the effective rate on your expected profit.
Step 2: Reserve a slice of every profitable month
Rather than facing the whole bill at once, transfer an estimated percentage of each month's profit into a separate reserve account. If your effective rate is around 22%, set aside roughly that share of profit as you make it. The money is never really yours to spend — treat it like VAT.
Step 3: Adjust for capital allowances and reliefs
Your taxable profit is not your accounting profit. Capital allowances, R&D relief and losses all change the figure, usually downward. Update your estimate when you make a large qualifying purchase or a successful relief claim, so you are not over-reserving.
Step 4: Diarise the payment date
Mark the payment date — nine months and one day after year end — and the CT600 filing date twelve months after. Large companies pay in quarterly instalments instead. Missing either triggers interest and penalties.
Step 5: Have a backstop
If a reserve falls short — because profit came in higher, or the cash got used — a short working-capital facility covers the gap so the bill is always paid on time.
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Frequently asked questions
How much should I set aside for corporation tax?
Roughly your effective rate on profit — often around 19% to 25% depending on your profit band, before reliefs. Reserving a slice of each profitable month into a separate account means the bill is already covered when it falls due.
When is corporation tax actually due?
Nine months and one day after your accounting period ends, for most companies. The CT600 return is due twelve months after. Large companies pay in quarterly instalments instead of a single payment.
Why is my taxable profit different from my accounts profit?
Because tax adjusts the accounting figure — depreciation is replaced by capital allowances, some costs are disallowed, and reliefs like R&D reduce it. Always base your reserve on the taxable profit, not the raw accounts profit.
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