Understand what is being taxed
UK companies generally pay Corporation Tax on taxable profits. Accounting results are adjusted under tax rules, so applying a headline rate to revenue or the bank balance is unreliable. Sole traders use a different regime.
Start with clean evidence
Reconcile income, supplier costs, payroll, assets, finance and founder transactions. Keep invoices, receipts, contracts and business-purpose notes. An accounting expense does not automatically receive the tax treatment a founder expects.
Estimate, then reserve
Build a forecast from expected accounting profit and known tax adjustments, with professional input for reliefs, losses or unusual transactions. Hold the estimate in a labelled reserve. There is no universal reserve percentage.
Separate cash from profit
Customer receipts, loan proceeds, asset purchases and timing differences can make cash look stronger or weaker than taxable profit. Connect the tax estimate to the cash forecast.
Track payment and filing separately
Companies calculate and pay Corporation Tax; HMRC does not simply send a conventional bill. The Company Tax Return and payment have separate deadlines. Confirm both in official services.
Know when the simple model breaks
Large profits, R&D, capital allowances, overseas activity, losses, groups and founder transactions can need specialist work. Raise these before the transaction or claim.
Review the estimate as a management number
Compare results with the tax forecast monthly or quarterly and update the reserve. Before dividends or major commitments, check distributable profits and cash after tax.
Founder checklist
- Keep reconciled monthly records
- Maintain evidence and purpose notes
- Forecast taxable profit with review
- Ring-fence a tax reserve
- Calendar payment and filing dates
- Flag unusual transactions early
Frequently asked questions
Does HMRC send a Corporation Tax bill?
Companies are responsible for working out, reporting and paying the liability; do not wait for a conventional bill.
Is Corporation Tax calculated on turnover?
It is generally based on taxable profit, not total sales. The tax calculation can differ from the profit in statutory accounts.
How much should I reserve?
There is no safe universal percentage. Use a current estimate reflecting the company, period and circumstances.
What if the company made a loss?
Filing may still be required, and loss relief depends on the facts and current rules. Obtain advice before assuming how a loss can be used.
