Understanding Your Tax Calculation
Understand how corporation tax is calculated from your accounting profit. Explains key CT600 boxes, disallowable expenses, capital allowances, and tax rates.
TinyTax calculates your corporation tax automatically based on the figures you enter. This guide explains how the calculation works and what the key numbers mean.
The Tax Computation Section
When you complete your P&L and Balance Sheet, TinyTax generates a Tax Computation showing exactly how your tax is calculated:
Tax Computation - Current Year
Show all| Trading profit before tax | |
| Add back: Depreciation (disallowable for tax) | |
| Add back: Disallowable expenses | |
| Less: Annual Investment Allowance | () |
| 165Net trading profits |
Corporation Tax Calculation
| 315Profits chargeable to corporation tax | |
| Tax @ 19% | |
| 440Corporation Tax Payable |
The tax computation shows how your accounting profit is adjusted for tax purposes. Box numbers correspond to CT600 form fields.
This section shows:
- Your accounting profit adjustments
- Your taxable profit (Box 315)
- The tax rate applied
- Any marginal relief
- Your final tax liability (Box 440)
From Accounting Profit to Taxable Profit
Your accounting profit (from your P&L) isn't the same as your taxable profit. Several adjustments are made:
Add Back: Disallowable Expenses
Some expenses reduce your accounting profit but aren't allowed for tax:
| Expense | Why It's Disallowed |
|---|---|
| Depreciation | Replaced by capital allowances |
| Client entertaining | Not tax deductible |
| Personal expenses | Not business related |
| Fines and penalties | Not deductible as a deterrent |
| Expense | Why It's Disallowed |
|---|---|
| Depreciation | Replaced by capital allowances |
| Property improvements | Capital expenditure, not repairs |
| Personal use portion | Not business related |
| Fines and penalties | Not deductible as a deterrent |
Deduct: Capital Allowances
Instead of depreciation, you can claim capital allowances on qualifying assets:
| Allowance | What It Covers | Limit |
|---|---|---|
| Annual Investment Allowance (AIA) | Plant, machinery, equipment | £1,000,000/year |
| Writing Down Allowance | Assets over AIA limit | 18% or 6% per year |
| First Year Allowance | Certain new assets | Up to 100% |
Key Box Numbers Explained
| Box | Name | What It Represents |
|---|---|---|
| 145 | Turnover | Your total sales/revenue |
| 165 | Net Trading Profits | Trading profit after all adjustments |
| 170 | Other Income | Bank interest, investment income |
| 315 | Profits Chargeable to CT | The amount you pay tax on |
| 430 | Tax Before Reliefs | Gross tax at the applicable rate |
| 435 | Marginal Relief | Reduction for medium-sized companies |
| 440 | Corporation Tax Payable | Your final tax bill |
| Box | Name | What It Represents |
|---|---|---|
| 170 | Property Income | Rent received and other property income |
| 190 | Total Property Income | Property income after adjustments |
| 315 | Profits Chargeable to CT | The amount you pay tax on |
| 430 | Tax Before Reliefs | Gross tax at the applicable rate |
| 435 | Marginal Relief | Reduction for medium-sized companies |
| 440 | Corporation Tax Payable | Your final tax bill |
Corporation Tax Rates (2023/24 onwards)
Since April 2023, the rate depends on your profit level:
| Profit Level | Rate | Description |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate |
| £50,001 - £250,000 | 19-25% | Marginal rate with relief |
| Over £250,000 | 25% | Main rate |
What is Marginal Relief?
If your profits fall between £50,000 and £250,000, you don't jump straight to 25%. Instead, you get marginal relief - a reduction that creates a smooth transition.
The formula is: ``` Marginal Relief = (Upper Limit - Profits) × 3/200 ```
For example, with £100,000 profit:
- Tax at 25% = £25,000
- Marginal Relief = (£250,000 - £100,000) × 3/200 = £2,250
- Net Tax = £22,750
- Effective rate: 22.75%
Associated Companies
If your company has associated companies (companies under common control), the profit thresholds are divided by the number of associated companies plus one.
| Associates | Lower Threshold | Upper Threshold |
|---|---|---|
| 0 | £50,000 | £250,000 |
| 1 | £25,000 | £125,000 |
| 2 | £16,667 | £83,333 |
What counts as associated?
Companies are associated if they're under common control (same person or group controls 50%+ of both). This includes:
- Companies you personally control
- Companies controlled by close family members (if commercially interdependent)
- Dormant companies that hold assets (e.g. shares in subsidiaries)
Where to enter this in TinyTax
You'll find the Associated companies field (Box 326) in the Tax Computation section, below the balance sheet. Enter the number of other associated companies (not including the company you're filing for).
Periods Spanning Financial Years
If your accounting period spans 1 April (the start of a new financial year), profits are apportioned between the years:
| Period | FY Dates | Days |
|---|---|---|
| 1 Jan 2024 to 31 Dec 2024 | FY2023: 1 Jan - 31 Mar (91 days) | 25% |
| FY2024: 1 Apr - 31 Dec (275 days) | 75% |
Example Tax Calculation
Starting point:
- Turnover: £200,000
- Expenses: £150,000
- Accounting profit: £50,000
- Add back: Depreciation £5,000
- Less: AIA claim (£8,000)
- Taxable profit (Box 165): £47,000
- Profit £47,000 is below £50,000 threshold
- Rate: 19%
- Corporation Tax (Box 440): £8,930
Starting point:
- Rental income: £80,000
- Property expenses: £30,000
- Accounting profit: £50,000
- Add back: Depreciation £3,000
- Less: AIA claim on furnishings (£2,000)
- Taxable profit (Box 315): £51,000
- Profit £51,000 is in the marginal relief band
- Tax at 25% = £12,750
- Marginal Relief = (£250,000 - £51,000) × 3/200 = £2,985
- Corporation Tax (Box 440): £9,765
Common Questions
"Why is my tax different from 19% or 25% of my profit?"
Several reasons:
- Marginal relief - If profit is £50k-£250k, you get relief
- Period length - Short or extended periods affect thresholds
- Associated companies - Reduce your thresholds
- Financial year spanning - Different rates may apply to portions
"What's the difference between Box 165 and Box 315?"
- Box 165 (Net Trading Profits): Just your trading profit after adjustments
- Box 315 (Profits Chargeable): Your total taxable profit including investment income
"What's the difference between Box 170, Box 190, and Box 315?"
- Box 170: Your total property income (rent received)
- Box 190: Property income after allowable deductions
- Box 315: Your total taxable profit (what tax is calculated on)
"Why doesn't my P&L profit match the taxable profit?"
Your P&L shows accounting profit - calculated using accounting rules (like depreciation).
Your taxable profit is calculated using tax rules - which disallow some expenses and allow different deductions (like capital allowances).
The tax computation bridges these two figures.
"How does TinyTax handle losses?"
If you have:
- Current year loss: No tax to pay; loss can be carried forward or back
- Losses brought forward: Offset against this year's profits first
- Trading losses: Can offset against trading income and certain other income
- Property losses: Can offset against property income (with restrictions on carrying forward)
TinyTax applies losses in the correct order per HMRC rules.
"Can I change the tax calculation?"
You can't manually override the tax calculation - it's computed based on your inputs. If the calculation seems wrong:
- Check your P&L figures are correct
- Check your capital allowance claims
- Verify the number of associated companies
- Ensure your period dates are accurate
The Tax Computation Document
When you submit, TinyTax generates a Tax Computations PDF showing:
- Detailed calculation from profit to tax
- Box-by-box breakdown
- Marginal relief calculation (if applicable)
- Submission to HMRC
Still Confused?
Tax calculations can be complex. If your situation doesn't match these examples or you're unsure about your calculation:
Last updated: December 2025
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