When does my company have to pay Corporation Tax?
Corporation Tax is normally due nine months and one day after the end of the accounting period. For companies with profits over £1.5 million (or lower if there are associated companies), quarterly instalment payments apply. TLPI can help you forecast your liability and plan payments.
What counts as taxable profit for Corporation Tax purposes?
Taxable profit is broadly the company's accounting profit, adjusted for disallowable expenses and allowances. It includes trading profits, rental income, and chargeable gains on assets sold. Pension contributions, interest on business borrowings, and capital allowances are among the deductions that reduce taxable profit.
Can the Annual Investment Allowance help reduce my tax bill?
Yes. The Annual Investment Allowance (AIA) gives a 100% deduction for qualifying plant and machinery expenditure, up to £1 million per year. If your company is planning to buy equipment, vehicles, or fixtures, timing the purchase before the year-end can bring forward a significant tax deduction.
Are director salaries deductible for Corporation Tax?
Yes, provided the salary is commercially justifiable for the work done. Director salaries that are disproportionate to the director's role may be challenged by HMRC. In practice, most owner-director salaries are set at a modest level with the balance extracted as dividends - both are deductible or at least taken from post-tax profits in a planned way.
Are dividends deductible for Corporation Tax?
No. Dividends are paid from post-tax profits and do not reduce the Corporation Tax bill. This is why pension contributions are often preferred over additional salary or dividends as a method of extracting value - they reduce profit before tax rather than after it.
What is Research and Development (R&D) tax relief and could it apply to my company?
R&D tax relief allows companies that invest in qualifying research and development to claim enhanced deductions or a payable credit against their Corporation Tax liability. It applies more broadly than many directors realise - not just to technology businesses.
Does making a company pension contribution affect my personal tax?
No. An employer pension contribution is made by the company, not by you as an individual, so it does not affect your personal income tax or National Insurance position. It reduces the company's taxable profit, which reduces Corporation Tax. The funds then accumulate within your pension scheme.
What happens to Corporation Tax if I sell the company?
If your company sells its assets, any gain on those assets is subject to Corporation Tax as a chargeable gain. If you (as a shareholder) sell your shares, that is a personal Capital Gains Tax event, not Corporation Tax. Business Asset Disposal Relief (formerly Entrepreneurs' Relief) may reduce the rate to 14% for qualifying disposals up to the £1 million lifetime limit. Forward planning before a sale can make a significant difference to the overall tax cost.
Can I use losses in one year to offset profits in another?
Yes. Trading losses can generally be carried forward to offset future profits of the same trade, carried back one year against prior profits (within limits), or, in some cases, surrendered to other group companies. The rules are complex and depend on the type of loss and the company's structure.
Do associated companies affect my Corporation Tax rate?
Yes. The £250,000 and £50,000 profit thresholds (which determine whether the 25% or 19% rate applies) are divided between associated companies. Two associated companies each have thresholds of £125,000 and £25,000. If you own or control multiple companies, the effective Corporation Tax rate on each may be higher than you expect.
How does making pension contributions through my company reduce Corporation Tax?
Employer contributions to a pension scheme — such as a SSAS — are treated as a business expense and are fully deductible against your company's taxable profits, provided they are made wholly and exclusively for the purposes of the business. For a company paying the main rate of Corporation Tax, this means a meaningful reduction in the tax bill for every pound contributed to the pension. It also reduces the retained profit shown on your year-end balance sheet, which can be relevant for inheritance tax and business valuation purposes. This is one of the most tax-efficient ways a director can extract value from a company. See how pension contributions reduce Corporation Tax →
What is the difference between tax evasion, tax avoidance, and tax planning?
It is worth being clear on all three. Tax evasion means deliberately hiding income, assets, or information from HMRC — it is illegal and carries serious criminal penalties. Tax avoidance refers to arrangements that technically comply with the letter of the law but work against its intent; HMRC actively challenges these under anti-avoidance legislation and has significant powers to counteract them. Tax planning — sometimes called tax mitigation — means arranging your affairs in ways that Parliament has specifically legislated to encourage, such as making pension contributions, claiming allowable reliefs, or using structures like a SSAS or FIC. TLPI works exclusively within HMRC-compliant tax planning and strategy. Everything we do is built on reliefs and allowances that HMRC put in place for this purpose. Book a consultation →
Can I reduce Corporation Tax by paying myself a pension through my company?
Yes, and this is one of the most effective strategies available to company directors. Your company makes contributions directly to your pension — such as a SSAS — and those contributions are deducted from your taxable profits before Corporation Tax is calculated. Unlike taking the money as salary or dividends, the contribution is not taxed as your personal income. TLPI specialises in helping directors structure this correctly. Find out more →
What counts as a deductible expense for Corporation Tax?
HMRC allows a deduction for expenses incurred wholly and exclusively for the purposes of the trade. This includes staff costs, premises costs, equipment, professional fees, and qualifying pension contributions, among others. Personal expenditure, fines, and client entertainment are generally not deductible. Your accountant should review your expense categories regularly — and TLPI can work alongside your accountant on the pension planning side. Speak to us →