Corporation Tax Rates 2022 Calculator
Calculate your company’s corporation tax liability for the 2022 tax year with our accurate and up-to-date calculator.
Your Corporation Tax Calculation
Comprehensive Guide to Corporation Tax Rates 2022
Understanding corporation tax rates is crucial for businesses operating in the UK. The 2022 tax year introduced significant changes to how companies are taxed, with a new two-rate system replacing the previous single rate. This guide will help you navigate the complexities of corporation tax calculations for 2022.
Key Changes in 2022 Corporation Tax Rates
The most substantial change in 2022 was the introduction of a two-tier corporation tax system:
- Main rate: 25% for companies with profits over £250,000
- Small profits rate: 19% for companies with profits up to £50,000
- Marginal relief: A tapered rate between £50,000 and £250,000
This replaced the previous flat rate of 19% that had been in place since 2017. The change was designed to ensure larger, more profitable companies contribute a higher proportion of tax.
How Corporation Tax is Calculated in 2022
The calculation process involves several steps:
- Determine taxable profits: Start with your accounting profits and make any necessary adjustments for tax purposes.
- Annualise profits: If your accounting period isn’t 12 months, convert profits to an annual equivalent.
- Apply thresholds: Determine which tax rate(s) apply based on your annualised profits.
- Calculate tax: Apply the appropriate rate(s) to your profits.
- Adjust for marginal relief: If your profits fall in the marginal band, apply the appropriate relief.
Understanding Marginal Relief
Marginal relief provides a gradual increase in the effective tax rate for companies with profits between £50,000 and £250,000. The formula for calculating marginal relief is:
Marginal Relief = (Upper Limit – Annualised Profits) × (Standard Rate – Small Profits Rate) / Annualised Profits
Where:
- Upper Limit = £250,000
- Standard Rate = 25%
- Small Profits Rate = 19%
Impact of Associated Companies
The thresholds for the small profits rate and marginal relief are divided by the number of associated companies plus one. For example:
| Number of Associated Companies | Lower Limit (£) | Upper Limit (£) |
|---|---|---|
| 0 | 50,000 | 250,000 |
| 1 | 25,000 | 125,000 |
| 2 | 16,667 | 83,333 |
| 3 | 12,500 | 62,500 |
An associated company is typically one that is under common control with your company, either through ownership or other means of control.
Payment Deadlines and Filing Requirements
For the 2022 tax year, the key deadlines were:
- Filing deadline: 12 months after the end of your accounting period
- Payment deadline: 9 months and 1 day after the end of your accounting period
Companies with profits over £1.5 million are required to make quarterly instalment payments.
Comparison with Previous Years
| Tax Year | Main Rate | Small Profits Rate | Lower Limit | Upper Limit |
|---|---|---|---|---|
| 2022 | 25% | 19% | £50,000 | £250,000 |
| 2021 | 19% | 19% | N/A | N/A |
| 2020 | 19% | 19% | N/A | N/A |
| 2019 | 19% | 19% | N/A | N/A |
The 2022 changes represented the first significant alteration to corporation tax rates since 2017, when the rate was reduced from 20% to 19%.
Common Mistakes to Avoid
When calculating your corporation tax, be aware of these common pitfalls:
- Incorrect profit annualisation: Failing to properly annualise profits for accounting periods that aren’t 12 months
- Ignoring associated companies: Not accounting for associated companies when determining thresholds
- Misapplying marginal relief: Incorrectly calculating or applying marginal relief for profits in the £50,000-£250,000 range
- Missing deadlines: Late filing or payment can result in penalties and interest charges
- Incorrect adjustments: Failing to make proper tax adjustments to accounting profits
Planning Opportunities
There are several legitimate ways to manage your corporation tax liability:
- Profit extraction: Consider the most tax-efficient way to extract profits (salary, dividends, etc.)
- Capital allowances: Maximise claims for capital expenditures
- R&D tax credits: If eligible, claim research and development tax reliefs
- Pension contributions: Employer pension contributions are typically tax-deductible
- Loss relief: Utilise losses from previous years where possible
Frequently Asked Questions
What counts as an associated company?
An associated company is generally one that is under common control with your company. This could be through:
- Same person or group of people having control of both companies
- One company having control of another
- Two companies being under the control of the same person or group
How do I know if I need to pay by instalments?
You must pay your corporation tax by instalments if your company is:
- Considered ‘large’ (generally with profits over £1.5 million)
- Part of a group where the combined profits exceed £1.5 million
Can I reduce my corporation tax bill?
Yes, there are several legitimate ways to reduce your corporation tax liability:
- Claim all allowable business expenses
- Utilise capital allowances for business assets
- Claim R&D tax credits if eligible
- Consider pension contributions
- Use losses from previous years
What happens if I pay my corporation tax late?
If you pay your corporation tax late, HMRC will charge:
- Interest on the unpaid amount from the due date
- Potential penalties if the payment is significantly late
Conclusion
The 2022 corporation tax changes introduced a more complex system with multiple rates and marginal relief calculations. While this may create additional administrative burden for companies, proper planning and understanding of the rules can help manage your tax liability effectively.
Remember that tax laws are complex and subject to change. For specific advice tailored to your company’s situation, it’s always best to consult with a qualified tax professional or accountant.
Our calculator provides a good estimate of your corporation tax liability, but for official calculations, you should use HMRC’s services or professional tax software.