Taxation (UK) · The scope of corporation tax

Chargeable Profits and Taxable Total Profits Explained

Updated 11 October 2026 · Fact-checked

A company's chargeable profits are its trading profits, property income, interest and other income, plus chargeable gains, all added together. Deduct qualifying charitable donations from this total to get taxable total profits (TTP). Corporation tax is then charged on TTP at the rate that applies.

Understand Chargeable Profits and Taxable Total Profits

A company pays corporation tax on its profits for each accounting period. Unlike an individual, it has no personal allowance and no separate income tax bands. All its income and gains go into a single computation.

The computation starts with each source of income. These are trading profits (after the adjustments and capital allowances covered elsewhere), property business income, non-trading loan relationship income (interest received on bank deposits and loans) and any other income. Add chargeable gains to these. The gains are included in full, and the company has no annual exempt amount. The total is the company's total profits, often called chargeable profits.

The next step is to deduct reliefs. In this topic the relief is qualifying charitable donations. A company that pays a donation to a charity can deduct the amount paid in the period. Charitable donations are not a trading expense, so you must not deduct them in the adjustment of profit. Instead, add them back there if they were charged in the accounts, then deduct them once, as a charge on total profits. The result of the deduction is taxable total profits.

Dividends from UK companies are normally exempt from corporation tax. They are not in TTP. They matter later because they form part of augmented profits, which are used to set the rate limits. Keep them out of your TTP figure, and show them separately if the question asks for augmented profits.

A clear layout earns marks. Show a column for each source, a total line, the donations line and the TTP line. Label every figure.

Key rules to remember

Total (chargeable) profits: Trading profits + Property income + Interest and other income + Chargeable gains; Include only income within the charge. Exclude UK dividends received.
Taxable total profits (TTP): Total profits − Qualifying charitable donations; Deduct the donations paid in the accounting period.
Corporation tax liability: TTP × rate; The ACCA tables give 19% small profits rate and 25% main rate for FY2023 to FY2025. Rate choice and marginal relief depend on augmented profits.
Augmented profits: TTP + Dividends received from non-group companies; Used for the £50,000 lower limit and £250,000 upper limit, not for the tax base itself.
Marginal relief: (Upper limit − Augmented profits) × 3/200 × TTP ÷ Augmented profits; Applies where augmented profits fall between £50,000 and £250,000, before any adjustment for a short period or associated companies.

How to solve Chargeable Profits and Taxable Total Profits questions

Use this layout for any computation that asks for chargeable profits or TTP.

1Identify the accounting period and the length of the period. If it is not 12 months, the limits and trading profit may need time-apportioning.
2Work out the trading profit first. Adjust the accounting profit, add back donations, and deduct capital allowances.
3Compute property business income and interest income. Interest is taxed on an accruals basis for the period.
4Compute any chargeable gain. Add it to the total in full, with no annual exempt amount.
5Set out the computation. List each source, then add them to give total profits.
6Deduct the qualifying charitable donations paid in the period to reach TTP.
7Leave out UK dividends from TTP. Note them if augmented profits are required.
8Apply the rate only if the question asks for the tax. Check limits against augmented profits.

Quickest way: Five-line computation shell

When to use it: Use it in Section C when time is short and you have several items of income to sort.

Write the five headings first: Trading profit, Property income, Interest income, Chargeable gains, Total profits.
Sort each item in the question into a heading as you read. Cross out dividends received as you go and note the amount separately.
Mark any donations in the accounts for add-back in the trading profit working.
Add the headings, deduct the donations paid, and write TTP.
Check you have not deducted the same donation twice.

Common mistakes in Chargeable Profits and Taxable Total Profits

Deducting charitable donations in the trading profit working and again from total profits.
The donation appears in the accounts as an expense, so students think it is already allowed.
Fix: Add it back in the adjustment of profit, then deduct it once from total profits.
Including UK dividends received in TTP.
Students treat all income as taxable, as they would for an individual.
Fix: Exempt dividends are excluded from TTP. Use them only to find augmented profits.
Applying an annual exempt amount to a company's chargeable gain.
Mixing up the individual and company rules.
Fix: A company has no annual exempt amount. Add the full gain to total profits.
Deducting donations that were only accrued, not paid.
Students follow the accounts, which use accruals.
Fix: Deduct the amount paid in the period.
Including the gain in trading profit.
A gain on a business asset looks like business income.
Fix: Show chargeable gains on their own line and never in the adjusted trading profit.

Worked examples

Example 1

Hatch Ltd prepares accounts for the year ended 31 March 2026. Its adjusted trading profit, before capital allowances, is £180,000. Capital allowances are £20,000. It has property income of £15,000, bank interest received of £5,000 and a chargeable gain of £30,000. It paid a qualifying charitable donation of £4,000, which is not yet in the adjusted trading profit figure. Compute taxable total profits.

Show the solution

Trading profit after capital allowances: £180,000 − £20,000 = £160,000.
Property income: £15,000.
Interest income: £5,000.
Chargeable gain: £30,000, taken in full.
Total profits: £160,000 + £15,000 + £5,000 + £30,000 = £210,000.
Deduct the qualifying charitable donation: £210,000 − £4,000 = £206,000.

Answer: Taxable total profits are £206,000.

Example 2

Birch Ltd has a 12-month accounting period. Its accounts profit is £90,000 after charging a charitable donation of £3,000 paid to a registered charity and after crediting £2,000 of UK dividends received. Capital allowances are £10,000. It has no other adjustments and no other income. Compute taxable total profits.

Show the solution

Start with accounts profit: £90,000.
Add back the donation charged in the accounts: £90,000 + £3,000 = £93,000.
Deduct the dividends, as they are not trading income: £93,000 − £2,000 = £91,000.
Deduct capital allowances: £91,000 − £10,000 = £81,000. This is the trading profit.
Total profits are £81,000, as there is no other income.
Deduct the donation paid: £81,000 − £3,000 = £78,000.

Answer: Taxable total profits are £78,000. The £2,000 dividends are excluded and would count only towards augmented profits.

Exam tips

Always show a full computation with labelled lines. Marks are given for each source and for the donation deduction.
In Section C, state your treatment of each item, such as dividends being exempt, in a few words. This secures method marks.
If a question gives accounts profit, work through add-backs and deductions step by step before you reach the total profits line.
For objective test questions, check whether the question asks for chargeable profits, TTP or augmented profits, as the answers differ.
Check the period length first. A short or long period changes the limits and the profit to be taxed.

Practice questions from The scope of corporation tax

Chargeable Profits and Taxable Total Profits in other exams

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

Chargeable Profits and Taxable Total Profits: frequently asked questions

What is the difference between chargeable profits and taxable total profits?

Chargeable profits (total profits) are the sum of all income and chargeable gains of the company. Taxable total profits are that total after deducting qualifying charitable donations. Corporation tax is charged on taxable total profits.

Are charitable donations an allowable expense for a company?

Not as a trading expense. You add back any donation charged in the accounts when adjusting profit. You then deduct qualifying donations paid in the period from total profits.

Do dividends received form part of taxable total profits?

No. Dividends from UK companies are normally exempt, so they are left out of TTP. They are included in augmented profits, which are used to decide the rate and limits.

Does a company get an annual exempt amount on gains?

No. A company pays corporation tax on the full chargeable gain, which is included in total profits.