If the client only asks their accountant to do year end work then they may not know what corporation tax is due until just before it is due.
One way to help with this is to get your year end information into the accountant as soon as possible once your year end has passed.
Many people like to save up for the corporation tax payment as they go along. If the accountant prepares monthly or quarterly figures then they will calculate the corporation tax due as they go along and you will know what to save.
If your accountant only does the year end work then a rough guide is to put aside 20% of your profit before dividends.
When the actual corporation tax is calculated the profit in the accounts will be the starting point. Amendments are then made for depreciation as capital allowances are claimed instead. There will also be amendments for any research and developments costs and any expenses that aren’t allowable for tax.
The rate of corporation tax is then applied to this amended profit to calculate what is due. In recent years the corporation tax has reduced by 1% per year. These changes take place in April at the start of the new tax year. If your year end is different to this then 2 rates may apply, for before and after the tax year where the rate changed.
Another important point to note is if your year end is not in line with the tax year then you should plan your capital expenditure to make the most of the first year allowances available.