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The short answer is between 19% and 25% of your profit, depending on how much profit you make. The longer answer matters, because the word doing the work in that sentence is profit.
This is where most people go wrong, and it's an expensive mistake in both directions.
Corporation tax is charged on your taxable profit. That's what's left after your allowable costs, not what came through the door. If you set aside a slice of turnover you'll massively over save, which strangles your cash flow for no reason. If you confuse the two the other way, you'll be short.
Your profit figure also isn't quite the number at the bottom of your management accounts. Some costs aren't allowable for tax. Some capital purchases attract reliefs that reduce the bill. That's the gap between what you think you owe and what you actually owe, and it's why the estimate needs checking rather than guessing.
Since April 2023 the rate depends on your profit level, and that hasn't changed for 2026/27.
Profits up to £50,000 are taxed at 19%. Profits above £250,000 are taxed at 25%. Between the two, marginal relief tapers the rate so it climbs gradually from one to the other.
There's a quirk in that middle band worth knowing. Every extra pound of profit between £50,000 and £250,000 effectively costs 26.5p, which is higher than the main rate itself. It happens because the benefit of the lower rate gets withdrawn as profits rise. Plenty of owner-managed businesses sit in that band without realising the marginal cost of the next pound they earn.
You can check the current rates on GOV.UK at any time.
If your profits are comfortably under £50,000, set aside a fifth and you'll be close.
If you're in the marginal band, set aside a quarter. You'll be slightly over, which is the right way to be wrong.
If you're near £250,000 or above, a quarter is your number.
One trap to watch. If you control more than one company, the £50,000 and £250,000 thresholds get shared between them. Two associated companies and both thresholds halve. If you've set up a holding company or a separate property company, you may be in a higher band than you think.
Corporation tax is payable nine months and one day after the end of your accounting period. Your return is due twelve months after.
Read that again, because it catches people every year. You have to pay before you have to file. The deadline that feels like the important one arrives three months after the money has already gone.
There's a second gap underneath it. You earn the profit across twelve months, then pay the tax on it up to nine months after that period ends. Money you made twenty months ago is leaving your account today, and by then it feels like it belongs to the current year's trading.
The habit that works is dull and it doesn't take long.
Every month, look at your profit for the period, take a quarter of it, and move it into a separate account or pot. Do it as part of your monthly routine, not as something you'll get to.
Over save rather than under save. Finding you have more set aside than you needed is a pleasant afternoon. The alternative isn't.
None of this works if your bookkeeping is behind. You can't set aside a percentage of a number you don't have, and a business that's three months out of date is guessing at its own tax bill.
That's really part of a bigger issue about which money in your account is genuinely yours. We've written about how that plays out day to day here: Why is my business profitable but I have no money in the bank?
It happens, and it happens to businesses that are doing well.
Speak to us before the deadline rather than after it. There's usually more room than people expect, and the options narrow considerably once a payment has been missed.
If you're not confident your corporation tax estimate is right, or you've never had a clear number to set aside each month, that's a short piece of work.
Get in touch and we'll give you a figure you can actually plan around: carthyaccountants.co.uk/contact
