Business Tax - Marginal tax relief - Help!

Jamesmum

Can anyone tell me which is the correct way to calculate corporation tax on profits between £50k and £250k?

My study text tells me 25% on total profit (say £100k) then deduct marginal relief of (£250k-£100k) x 3/200, this would give £22,750 tax payable

My exam kit says calculate marginal tax relief as follows £100k x26.5%, which would give £26,500 tax payable.

Hoping someone can help with this as exam coming up shortly.

anony123

Have you asked your teacher?

uis143

The first method (per the study text) is correct to calculate the tax on total profits. The second method is only used to calculate the marginal (or additional tax) due on profits between £50k and £250k. So to calculate tax on profits of £100k use method 1. If you have profits of £50k and then earn an additional £100k of profits, the additional tax on the £100k will be £100k x 26.5% = £26,500.

Jamesmum

Thank you uis143, that makes sense.