Advanced Taxation (UK) · Corporation tax: taxable total profits

Computing Taxable Total Profits for UK Corporation Tax

Updated 11 October 2026 · Fact-checked

Taxable total profits (TTP) is the figure a UK company pays corporation tax on. You add trading profit, property income, non-trading loan relationship income, other income and chargeable gains. Then you deduct qualifying charitable donations. Apply the rates in the tax tables to the result.

Understand Computing Taxable Total Profits

A company pays corporation tax on one figure: taxable total profits (TTP). Think of it as a company's version of taxable income, but with chargeable gains included in the same computation. There is no separate capital gains tax for a company.

Each source of income is first computed under its own rules. Trading profit starts with the accounting profit, which you adjust for tax. You add back disallowable expenses, deduct non-taxable income, and then deduct capital allowances. Property income is taxed on the same basis as for individuals, with rent less allowable expenses. Non-trading loan relationship income is interest received less non-trading interest paid. Interest on loans used for the trade is deducted in arriving at trading profit instead.

The sources are then listed in a standard layout: trading profit, property business profits, non-trading loan relationship profits, other income and chargeable gains. The total is the company's total profits. You then deduct qualifying charitable donations to reach TTP. Losses, where there are any, are also deducted at the relevant stage, and they are covered in their own topics.

Dividends received from UK companies are normally exempt, so they are left out of TTP. They count in the profits used to test the marginal relief and instalment limits, but do not stop at the TTP line when you test those limits.

The layout matters because it earns marks even when a number is wrong. You show each source separately, so the marker can see which parts you got right. Then you apply the rate from the tax tables: the small profits rate is 19% and the main rate is 25%, with marginal relief between the lower limit of £50,000 and the upper limit of £250,000. Those limits are reduced for short accounting periods and for associated companies.

Key rules to remember

Taxable total profits: TTP = trading profit + property income + non-trading loan relationship income + other income + chargeable gains − qualifying charitable donations; Present each source on its own line. Deduct losses and reliefs at the correct point.
Trading profit adjustment: Adjusted trading profit = accounting profit + disallowable expenditure − non-trading income and non-taxable income − capital allowances; Remember to remove accounting depreciation and add back capital expenditure charged to the profit and loss account.
Non-trading loan relationship income: Net = interest receivable − non-trading interest payable; Trade-related interest is a deduction in the trading profit instead. A net deficit can be relieved under the loan relationship rules.
Corporation tax rates: Small profits rate 19% up to £50,000. Main rate 25% above £250,000.; These are the figures in the tax tables for financial years 2023 to 2025.
Marginal relief: (£250,000 − augmented profits) × 3/200 × TTP ÷ augmented profits; Applies where augmented profits are between £50,000 and £250,000. Augmented profits are TTP plus exempt distributions from non-group companies.

How to solve Computing Taxable Total Profits questions

Use the same layout every time. It shows the marker each source separately and stops you leaving items out.

1Read the scenario and note the accounting period. If it is not 12 months, you will need to adjust for a short period.
2Compute the adjusted trading profit. Start with the accounting profit, add back disallowable items, deduct income taxed elsewhere or exempt, and deduct capital allowances.
3Compute property income, non-trading loan relationship income and any other income separately. Exclude UK dividends received.
4Compute chargeable gains for the period and bring them into the total.
5Set out the layout: each source on its own line, then total profits.
6Deduct qualifying charitable donations paid in the period, and any relief for losses if the question gives them, to reach TTP.
7Apply the correct rate from the tax tables. Check the limits for associated companies or a short period, and use marginal relief if relevant.
8State your assumptions and show a nil entry where a source does not apply, so the marker sees you considered it.

Quickest way: Layout-first TTP method

When to use it: Use this when time is short and the question has many items of income and expense to sort.

Write the five source headings and the donations line on the page first.
Go through the scenario once and tick each item against a heading or mark it as ignored, for example UK dividends received.
Fill in the trading profit adjustment as a short list: add backs, deductions, capital allowances.
Total the sources, deduct donations, and give the TTP figure a clear box.
Check the rate and any limit adjustment last, so any error there costs only the tax calculation.

Common mistakes in Computing Taxable Total Profits

Including dividends received from UK companies in TTP.
Students carry over the individual income tax approach, where dividends are taxable.
Fix: Treat UK dividends as exempt for TTP. Remember them only for the augmented profits test.
Deducting trade-related loan interest again in the non-trading loan relationship line.
The interest appears in the accounts, and it is easy to adjust it twice.
Fix: Interest on trade borrowing is already in the trading profit. Only non-trading interest goes in the loan relationship line.
Deducting qualifying charitable donations from trading profit.
Students treat donations like other expenses.
Fix: Donations are not a trading expense. Add them back to trading profit and deduct them from total profits.
Forgetting to remove accounting depreciation before deducting capital allowances.
Both relate to fixed assets, and the add back is overlooked in a long list.
Fix: Always add back depreciation and any amortisation of tangible assets, then deduct capital allowances.
Taxing chargeable gains separately or at a different rate.
Students mix up the rules for individuals and companies.
Fix: Include the gains in total profits and tax them at the corporation tax rates.
Using the full £50,000 and £250,000 limits when the period is short or the company has associates.
The limits are memorised, and the scenario details are skipped.
Fix: Check the period length and the number of associated companies before choosing the rate. Adjust the limits accordingly.

Worked examples

Example 1

Fenwick Ltd has a 12-month accounting period. Its accounting profit is £180,000 after charging depreciation of £12,000, a donation to a registered charity of £3,000 and entertaining of customers of £2,000. Capital allowances are £20,000. It also received bank interest on a non-trade deposit of £4,000, which is included in the £180,000. Compute the taxable total profits.

Show the solution

Start with the accounting profit: £180,000.
Add back depreciation £12,000, the donation £3,000 and customer entertaining £2,000: total add backs £17,000.
Deduct non-trading interest income £4,000, which is taxed under loan relationships instead.
Deduct capital allowances £20,000.
Trading profit = £180,000 + £17,000 − £4,000 − £20,000 = £173,000.
Non-trading loan relationship income = £4,000.
Total profits = £173,000 + £4,000 = £177,000.
Deduct the qualifying charitable donation of £3,000 paid in the period.
TTP = £177,000 − £3,000 = £174,000.

Answer: Taxable total profits are £174,000.

Example 2

Lowmoor Ltd has a 12-month accounting period. Its tax-adjusted trading profit is £260,000. It has rent receivable, net of allowable expenses, of £30,000, and a chargeable gain of £45,000. It also received a dividend of £10,000 from an unconnected UK company. It paid a qualifying charitable donation of £5,000. Compute the taxable total profits and the corporation tax, assuming no associated companies.

Show the solution

Trading profit: £260,000.
Property income: £30,000.
Chargeable gain: £45,000.
The UK dividend of £10,000 is exempt and is not included in TTP.
Total profits = £260,000 + £30,000 + £45,000 = £335,000.
Deduct the donation: £335,000 − £5,000 = £330,000. This is TTP.
Augmented profits = £330,000 + £10,000 = £340,000, which is above the £250,000 upper limit.
No marginal relief applies, so the main rate of 25% is used.
Corporation tax = £330,000 × 25% = £82,500.

Answer: Taxable total profits are £3,30,000 and corporation tax is £82,500.

Exam tips

Always lay the computation out in the standard format, with one line per source, even if some lines are nil. Marks are given for the layout.
In the trading profit adjustment, show every item, including those you treat as no adjustment. A short note such as 'allowable' earns marks and shows reasoning.
Note the length of the accounting period and any associated companies in the first line of your answer. Limit errors are a common way to lose marks.
Pay attention to which items are paid or received in the period. Donations and interest follow the accounting period, not the date of the question.
Explain briefly why an item is excluded, for example UK dividends being exempt, since the requirement often asks you to explain.

Practice questions from Corporation tax: taxable total profits

Computing 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.

Computing Taxable Total Profits: frequently asked questions

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

Total profits is the sum of all the sources of income and the chargeable gains. Taxable total profits is that figure after deducting qualifying charitable donations and any losses or reliefs available. Corporation tax is charged on the taxable total profits.

Are chargeable gains taxed separately for a company?

No. A company includes its chargeable gains in total profits and pays corporation tax on them at the same rates as other profits. There is no annual exempt amount for companies.

Why are dividends from UK companies excluded from TTP?

They are normally exempt from corporation tax in the hands of the receiving company. They are still relevant for the augmented profits used in the limit tests and marginal relief calculation.

Do I use the tax tables for the corporation tax rates?

Yes. The tax tables give the small profits rate of 19% and the main rate of 25%, with limits of £50,000 and £250,000 and the marginal relief formula. Check the limits against the period length and any associated companies before you use them.