Why do we provide a corporation tax estimate?

If you've ever been employed by someone else you'll be used to paying your tax through the Pay as you earn (PAYE) system, so what you get paid, is what you can spend.

But when you work through your own Limited Company, a portion of every pound you make in profit has to be paid over to the tax man in the form of Corporation tax. 

You pay your tax over to the taxman once a year after your financial year passes . It's important to budget for this to make sure you don't get caught out. This will also allow you to see what retained earnings you have that can be paid out as a company dividend. 

To help you do this, Coconut gives you a rough estimate of your Corporation Tax that helps you figure out how much to set aside.

Using the tax estimate as a guide

Your tax estimate is based on the figures that you enter into Coconut and should only be considered a guide. Any income or expenses that aren’t captured in the Coconut app won’t be taken into account.

How we calculate it

We look at a few things to work out an estimate for your tax bill:

  • Your business income

  • Your allowable expenses

  • Any information added to your “Tax Profile” eg: your company year end - This will allow us to capture the transaction dates for your financial year end

We combine this with the tax rates that HMRC publish to work out a rough estimate for your tax.

This will be based on your company profits over the company financial year and the relevant Corporation tax rate for that period.

How accurate is the tax estimate?

The tax estimate will only be as accurate as your records stored in Coconut. 

To improve the accuracy of this feature, make sure that you check the categorisation on your transactions and ensure your “Tax Profile” is completed and up to date. 

To ensure that the Corporation tax estimate remains accurate please consider the following:

  • Ensure that remuneration is entered correctly between ‘salary’ and ‘dividends’

  • Note that we do not support Capital Allowances or the concept of depreciation currently. For more information can be found here

If you are unsure of any of the accuracy then please do check with your accountant. If you are unsure of any categories or chat with our support team.

Getting your final corporation tax bill from HMRC

Your exact tax bill will be calculated when you or your accountant prepares the company accounts to HMRC and Companies House. These deadlines will be dependent on your company incorporation date. You should expect the final amount to be different to the amount shown in the Coconut app.

If in doubt, ask for help

If you have specific questions about your tax affairs, you should speak to an accountant or tax advisor. You will be able to share access with your accountant in which they will be able to view your transactional data in real time. If you like to share access, revert to the ‘more’ tab in the app.  

For help with the tax estimate in the app, you can chat to our support team and we’ll try our best to help.

Did this answer your question?