Corporation Tax
Corporation tax is charged on the taxable total profits of a company. Profits = trading income plus property income plus non-trading loan relationship credits plus chargeable gains, less qualifying charitable donations and certain relieves. Dividends received are generally exempt but still matter as franked investment income for the payment instalments test, and as augmented profits for marginal relief.
The rate structure is the core computation: 25% main rate, 19% small profits rate where augmented profits are at or below the £50,000 lower limit, and marginal relief between £50,000 and £250,000. Marginal relief = (U − A) × N/A × 3/200, where U is the upper limit, A is augmented profits and N is taxable total profits. Both limits are divided by the number of associated companies (plus one) and time-apportioned for accounting periods shorter than 12 months. Associated company status turns on control, not on trading relationship, and is tested across the accounting period.
Know the relief landscape: full expensing and the annual investment allowance; the merged R&D expenditure credit scheme and the separate, more generous intensive SME scheme; patent box; creative sector reliefs; group relief for losses (current year only, surrendering company and claimant in common ownership); carry-forward against total profits subject to the £5m + 50% restriction; carry-back of trading losses; and terminal loss relief.
Traps: quarterly instalment payments are triggered by augmented profits above £1.5m (divided by associates), with the £20m threshold for the 'very large' three-monthly regime; close company rules, s.455 charges on director's loans and benefit-in-kind matching all appear as follow-on marks.
Worked example: augmented profits £100,000, no associates. Tax at 25% = £25,000, less MR = (250,000 − 100,000) × 3/200 = £2,250, giving £22,750 - an effective 22.75%.