Record your Corporation tax liability

Created on 12 July 2023 | Last modified on 10 August 2026

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Summary

How to record Corporation Tax in Sage Accounting.

Description

If your business is a limited company, and you make a taxable profit, you need to pay corporation tax to HMRC. The amount you pay and when you pay it depends on how much profit you make and when you make it.

NOTE:

Before you record the liability, create your Corporation Tax ledger accounts.

At the end of your financial year, your auditor calculates the amount of corporation tax your company owes. After considering a copy of your accounts for the year, HMRC then agrees on the value. This means you generally pay corporation tax in arrears.

Once you know how much corporation tax you owe, to make sure your accounts are accurate, record this using journals.

As you calculate corporation tax after the net profit, record the values on your balance sheet. Then create a journal to move the value to the profit and loss nominal ledger account.

Resolution

Record your Corporation tax liability

TIP:

Corporation tax can also apply to other organisations, such as clubs, societies and associations. If you’re not sure whether you need to pay corporation tax or how much you need to pay, speak to your accountant. If you prefer, your accountant can log in to your accounts through Accounting Partner Edition or Sage for Accountants and record the corporation tax for you.

In the following example, we owe HMRC corporation tax of £5000.

Go to Journals, then select New Journal.
Enter the date of the journal.

NOTE:

Use the last day of the financial year the corporation tax refers to.
Enter a reference, then enter the following information:

Ledger Account*	Details	Debit	Credit	Include on VAT Return?
Corporation Tax	Corporation tax	5000		Leave clear
Corporation Tax Liability	Corporation tax		5000	Leave clear

Select Save.

You’ve now recorded the amount of Corporation tax you owe as a liability and in the Equity section of the balance sheet. To clear your liability, when you pay the Corporation tax to HMRC, record a payment to the Corporation Tax Liability nominal ledger account.