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Taxation (UK) · The comprehensive computation of corporation tax liability

Corporation Tax Computation Format and Chargeable Profits

Updated 11 October 2026 · Fact-checked

A corporation tax computation lists a company's income by source (trading profit, property income, interest, then chargeable gains) to reach total profits. You then deduct qualifying charitable donations to get taxable total profits (TTP), and apply the rate to TTP. Always compute for each accounting period.

Understand Corporation Tax Computation Format and Chargeable Profits

A company pays corporation tax on its taxable total profits (TTP) for each accounting period. The computation is a standard layout. Learn it once and use it for every question.

The layout starts with the trading profit. You begin with the profit before tax in the accounts, add back items not allowed for tax, deduct income that is taxed elsewhere or not taxable, then deduct capital allowances. Next come property income, non-trading loan relationship income (interest), and chargeable gains. Add these together to get total profits before reliefs.

You then deduct reliefs, mainly qualifying charitable donations and any loss relief. The result is TTP. Dividends received from UK companies are exempt, so they are not in TTP. They matter later because they form part of augmented profits, which are used to test the rate limits.

The key point for companies is that all income and gains are added together into one figure. There are no separate bands or personal allowance. Companies do not have a savings or dividend nil rate band. Gains are not taxed under a separate CGT rate. They are included in total profits and taxed at the corporation tax rates.

Under the rates given by ACCA for the financial years 2023 to 2025, the small profits rate is 19% and the main rate is 25%. Marginal relief applies between £50,000 and £250,000, which are the lower and upper limits for a 12-month period with no associated companies.

Key rules to remember

Corporation tax computation layout
Trading profit + Property income + Interest (non-trading loan relationships) + Chargeable gains = Total profits before reliefs; less qualifying charitable donations (and loss reliefs) = Taxable total profits (TTP)
Use the same order every time. Show a zero or a nil line only if it helps you keep your place.
Adjusted trading profit
Profit per accounts + disallowable expenses − non-taxable income − income taxed elsewhere (e.g. rent, interest, gains) − capital allowances + balancing charges
Capital allowances are deducted after adjusting the profit. Do not use accounts depreciation.
Augmented profits
Augmented profits = TTP + exempt ABGH distributions (dividends from non-group companies)
Used only to test the limits and for marginal relief. It is not the base the tax is charged on.
Corporation tax rates (FY2023 to FY2025)
Small profits rate 19%; main rate 25%; lower limit £50,000; upper limit £250,000
Limits are for a 12-month period and are reduced for short periods or associated companies.
Marginal relief
(Upper limit − augmented profits) × standard fraction × TTP ÷ augmented profits, with standard fraction 3/200
Applies where augmented profits are between the lower and upper limits. Deduct the relief from tax at the main rate.

How to solve Corporation Tax Computation Format and Chargeable Profits questions

Use this method for any corporation tax computation question.

  1. 1Identify the accounting period and its length. Check whether it is 12 months, shorter, or needs splitting.
  2. 2Start the trading profit working with the profit per the accounts. Add back disallowable items, such as depreciation, entertaining, fines and capital expenditure.
  3. 3Deduct income included in the accounts that is taxed under another heading or exempt, such as rent received, interest received, profit on disposal of assets and dividends.
  4. 4Deduct capital allowances (and add any balancing charge) to reach the tax-adjusted trading profit.
  5. 5Compute property income, interest income and chargeable gains separately. Then add everything in the main computation.
  6. 6Deduct qualifying charitable donations paid and any loss reliefs to get TTP.
  7. 7Work out augmented profits and compare with the limits. Then calculate the tax at the correct rate, with marginal relief if needed.

Quickest way: Proforma-first method

When to use it: Use this in Section C when the time is tight and the information is spread across a long scenario.

  1. Write the skeleton of the computation first with headings: trading profit, property income, interest, chargeable gains, total profits, donations, TTP.
  2. Go through the question line by line. Put each figure straight into the working it belongs to, and mark it off.
  3. For the trading profit working, use a simple three-column list: item, add back, deduct. Do not rewrite the whole profit and loss account.
  4. Do not spend time on items that are not taxable, such as UK dividends received. State that they are exempt and move on.
  5. Check that every item in the scenario is used somewhere. Unused data often means a missed adjustment.

Common mistakes in Corporation Tax Computation Format and Chargeable Profits

  • Leaving accounting depreciation in the trading profit and not deducting capital allowances.

    Students forget that depreciation is never allowed for tax, or add it back but do not then give capital allowances.

    Fix: Always add back depreciation and amortisation, then deduct capital allowances as a separate step.

  • Including rent, interest or a gain in the trading profit as well as in its own section.

    The accounts include all income in profit before tax, so students leave it there and then add it again.

    Fix: Deduct each non-trading item from the accounts profit in the adjustment, then bring it into its own heading.

  • Including UK dividends received in taxable total profits.

    Students apply the income tax rules, where dividends are taxable.

    Fix: Dividends from UK and most overseas companies are exempt for companies. Leave them out of TTP, but include them in augmented profits.

  • Deducting qualifying charitable donations from trading profit.

    Donations are shown as an expense in the accounts, so students treat them as a trading deduction.

    Fix: Add the donation back in the trading profit adjustment. Then deduct the amount paid as a relief from total profits.

  • Applying income tax bands, a personal allowance or a CGT annual exempt amount to a company.

    Mixing up the rules for individuals and companies.

    Fix: Companies have no allowances. Chargeable gains are added to total profits and taxed at corporation tax rates.

Worked examples

Example 1

Quartz Ltd prepares accounts for the year ended 31 March 2025. Profit before tax is £210,000. This is after: depreciation £18,000; entertaining customers £4,000; donation to a registered charity (qualifying) £3,000; rental income £12,000 credited; bank interest received £2,500 credited. Capital allowances are £22,000. Calculate taxable total profits.

Show the solution
  1. Trading profit: start with £210,000.
  2. Add back depreciation £18,000, entertaining £4,000 and the donation £3,000. Total add-backs £25,000.
  3. Deduct rental income £12,000 and interest £2,500. Total deductions £14,500.
  4. Profit before capital allowances = 210,000 + 25,000 − 14,500 = £220,500.
  5. Deduct capital allowances £22,000. Trading profit = £198,500.
  6. Property income £12,000. Interest income £2,500.
  7. Total profits before reliefs = 198,500 + 12,000 + 2,500 = £213,000.
  8. Deduct the qualifying charitable donation £3,000. TTP = £210,000.

Answer: Taxable total profits are £210,000.

Example 2

Opal Ltd has a 12-month accounting period to 31 March 2025 with no associated companies. Its adjusted trading profit is £140,000, property income £20,000, and chargeable gain £30,000. It paid a qualifying donation of £5,000 and received no dividends. Calculate the corporation tax liability.

Show the solution
  1. Total profits before reliefs = 140,000 + 20,000 + 30,000 = £190,000.
  2. Deduct the donation £5,000. TTP = £185,000.
  3. No dividends, so augmented profits = £185,000.
  4. This is between £50,000 and £250,000, so marginal relief applies.
  5. Tax at the main rate: 185,000 × 25% = £46,250.
  6. Marginal relief = (250,000 − 185,000) × 3/200 × 185,000 ÷ 185,000 = 65,000 × 3/200 = £975.
  7. Corporation tax = 46,250 − 975 = £45,275.

Answer: The corporation tax liability is £45,275.

Exam tips

  • Show the trading profit adjustment as a separate working with a clear add-back and deduct layout. Marks are given for each item, even if the final figure is wrong.
  • In Section C, write a short note for any item that is exempt or not allowed, for example 'dividend exempt'. This earns method marks.
  • In objective test questions, watch for the trap of including dividends or charitable donations in the wrong place. The answer is all or nothing.
  • Check the length of the accounting period before using the limits. A period of less than 12 months reduces them.
  • Read the question for items that tell you the rate or limit to use, such as the number of associated companies or dividends received.

Practice questions from The comprehensive computation of corporation tax liability

Corporation Tax Computation Format and Chargeable Profits in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Corporation Tax Computation Format and Chargeable Profits: frequently asked questions

What is the format of a corporation tax computation in TX-UK?

List trading profit, property income, interest and chargeable gains. Add them to get total profits before reliefs. Deduct qualifying charitable donations and any losses to get taxable total profits. Then apply the rates.

Are dividends received taxable for a company?

Dividends received from other companies are normally exempt, so they are not in taxable total profits. They are included in augmented profits for the rate limit tests.

Where do capital allowances go in the computation?

They are deducted in the trading profit working. You adjust the accounts profit first, then deduct capital allowances. Any balancing charge is added instead.

How are chargeable gains taxed for a company?

They are added to total profits and taxed at the normal corporation tax rates. There is no separate CGT rate or annual exempt amount for companies.