Many UK businesses ask themselves the question, ‘why is My Company Tax Bill So High?’. You’ve probably asked yourself this question too. Especially if you’ve found your way to this article.

This article aims at highlighting the most common factors contributing to high corporation tax bills for UK limited companies and provides strategies to manage and potentially reduce these bills.


Corporation tax is usually a big expense for limited companies in the UK. Understanding how it is calculated and what influences the final amount is often unknown by the average business owner.

High corporation tax bills can drain company cash, affecting growth and cash position. It’s essential for business owners to understand the components and strategies to plan for the correct corporation tax bill.

Corporation Tax Basics

What is Corporation Tax?

Corporation tax is a tax on the profits of limited companies. It is calculated based on the company’s taxable income, including trading profits and investment income. As of 2024, corporation tax rates in the UK range between 19% and 25%, depending on the company’s profits.

Factors Contributing to High Corporation Tax Bills

You Calculated It Wrong

99% of the time when you’re asking yourself ‘why is my company tax bill so high’, its down to you calculating your corporation incorrectly. It happens all the time. If this happens, don’t panic. It’s easy to miss a calculation or misread something on your expense spreadsheet, leading to unexpected bills. Thankfully, HMRC allow a window of 12 months to file an amendment and rectify your tax position. Our accountants ensure that every penny is accurately accounted for.

Changes in Tax Rates

Recent changes in corporation tax rates can catch businesses off guard. In April 2023, the UK introduced a tiered tax system, increasing the rate for higher profit margins. You may have calculated your current corporation tax bill based on the old tax rates.

A comparison of tax bills before and after the rate change highlights the impact on mid-sized businesses. Let’s take a business making £100,000 in profits and compare.

Under the old tax rate of 19%, the corporation tax bill would have been £19,000.

Under the new tax rate, and accounting for some boring marginal relief calculations, the new rates would attract a corporation tax bill of £20,875.

Non-deductible Expenses

Certain business expenses are not deductible for tax purposes, leading to higher taxable profits. Entertaining clients is a common non-deductible expense that can inflate taxable income. Theres a high possibility you were expecting these to reduce your profits and lead to a lower tax bill. These ’expenses’ unfortunately need to be added back and ultimately results in a higher profit and therefore a higher corporation tax bill.

Mismanagement of Deductions and Reliefs

Failing to properly claim available tax deductions and reliefs can result in paying more tax than necessary. Underutilising R&D tax credits or capital allowances for assets you bought throughout the year, are recurring reasons why we see clients paying higher tax bills than they should have.


As an immediate fix, you should always ensure all eligible deductions and reliefs are claimed, such as expenses, R&D tax credits, capital allowances, and loss carry backs and carry forwards.  

It’s then important for companies to engage in proactive tax planning to forecast tax liabilities. Sometimes you may not actually have a tax bill which is too high or has been calculated incorrectly. Sometimes the tax liability is correct. It’s equally as important to plan for your tax liability to ensure the cash position is healthy enough to pay it, when it arises. Working with one of our tax advisors to plan for and optimise tax payments throughout the fiscal year.

Make sure you are maintaining precise and up-to-date financial records to accurately report your company’s income and expenses, ensuring compliance and optimisation. You can do this inhouse with your own finance function, through 3rd party software or externally with one of our accountants.


Understanding the factors that lead you to ask, ‘Why is My Company Tax Bill So High’, are essential for managing a company’s financial health. By implementing strategic tax planning and maximising available reliefs, businesses can effectively reduce their tax liabilities.

No body wants to pay tax, that’s a given, but it doesn’t have to be the doom and gloom annual event that we all dread. Review your current tax strategy, consult with one of our tax professionals, and ensure you are taking full advantage of all available tax reliefs to optimise your corporation tax payments. If you do all this, I promise you the tax bill won’t feel as bad.

Author: MJ Kane