CT600 for Software Developers: Complete Guide

If you run your software development business through a UK limited company, you need to file a CT600 Corporation Tax return. This guide covers everything specific to developers and tech freelancers.

Overview: Software Development as a Limited Company

Running your development business through a company means:

• Corporation Tax on profits (19-25%)
• CT600 required within 12 months of year end
• Different expense rules than employment
• Potential R&D tax credit eligibility

Key Tax Considerations for Developers

1. Income Recognition

Your turnover for Box 145 includes:

• Client project fees
• Retainer payments
• Support and maintenance income
• Consulting fees
• Licence or royalty income
• SaaS subscription revenue (if applicable)

2. IR35 Considerations

If you're a contractor:

Outside IR35:

• Take salary + dividends
• Normal CT600 filing
• Company pays Corporation Tax on profits

Inside IR35:

• Client deducts tax and NIC before payment
• Company receives net amount
• Different accounting treatment

This guide assumes you're outside IR35 or working for multiple clients.

3. R&D Tax Credits

Software development may qualify for R&D relief:

Qualifying activities:

• Developing new software products
• Solving technological uncertainties
• Creating novel algorithms
• Overcoming technical challenges

Benefits:

• Enhanced deduction (86% for profit-making SMEs)
• Cash credit if loss-making
• Reduce Corporation Tax bill

We cover this in detail below.

Calculating Your CT600

Box 145: Turnover

Report all fee income:

``` Client A contracts £80,000 Client B retainer £24,000 Support agreements £6,000 Total turnover £110,000 ← Box 145 ```

Operating Expenses

Typical developer expenses:

Category	Example Amount
Equipment (if not capital)	£2,000
Software subscriptions	£3,000
Cloud hosting	£1,500
Internet/phone	£1,200
Home office	£2,400
Training/courses	£1,500
Professional fees	£1,500
Insurance	£800
Travel	£1,000
Other	£1,100
Total expenses	£16,000

Box 165: Trading Profit

``` Turnover £110,000 Less: Expenses (£16,000) Trading profit £94,000 ← Box 165 ```

Developer-Specific Expenses

Fully Deductible

Technology:

• IDE licences (JetBrains, VS Code extensions)
• GitHub/GitLab subscriptions
• Cloud services (AWS, Azure, GCP)
• Testing tools
• Project management (Jira, Trello)
• Design tools (Figma, Sketch)
• Domain registrations
• SSL certificates

Learning:

• Training courses
• Udemy/Pluralsight subscriptions
• Technical books
• Conference tickets
• Professional memberships (BCS, etc.)

Business:

• Accountancy software (FreeAgent, Xero)
• Invoicing tools
• Time tracking apps
• Communication tools (Slack, Zoom)
• Professional indemnity insurance

Home Office:

• Proportion of rent/mortgage interest
• Proportion of utilities
• Proportion of council tax
• Or simplified £6/week (£312/year) from HMRC

Capital Allowances

Equipment purchases get 100% relief through AIA:

Item	Treatment
Laptop/desktop	100% AIA
Monitors	100% AIA
Keyboard/mouse	100% AIA
Desk and chair	100% AIA
Networking equipment	100% AIA

The £1,000,000 Annual Investment Allowance means most developers can claim 100% on all equipment.

R&D Tax Credits for Developers

What Qualifies?

Software development that involves:

• Technological uncertainty - Not knowing if/how something can be done
• Seeking advancement - Going beyond existing solutions
• Technical challenge - Requires experimentation

Examples that may qualify:

• Building new frameworks or libraries
• Developing novel algorithms
• Creating new data processing methods
• Solving complex integration challenges
• Building AI/ML solutions
• Performance optimisation breakthroughs

Examples that don't qualify:

• Routine development work
• Using existing frameworks conventionally
• Bug fixing
• Minor feature additions
• General maintenance

R&D Benefit Calculation

For profitable SMEs (2024/25):

``` R&D expenditure £50,000 Enhanced deduction (86%) £43,000 Tax saving at 25% £10,750 ```

For loss-making SMEs:

• Cash credit available
• Complex calculation based on losses

Claiming R&D on CT600

R&D is claimed on the CT600 through:

• Supplementary pages CT600I, CT600J, or CT600K
• Additional Information Form (AIF) required
• Consider professional help for first claim

Example: Complete Developer CT600

DevCo Ltd - Software Development Contractor

Year ended 31 March 2025

Description	Amount
Contract income	£95,000
Other income	£5,000
Total turnover	£100,000
Software subscriptions	£2,400
Cloud hosting	£1,800
Equipment depreciation	£0 (use CA)
Home office	£2,400
Training	£1,200
Professional fees	£1,800
Insurance	£650
Other	£1,750
Total expenses	£12,000
Trading profit	£88,000

Capital allowances claimed:

• MacBook Pro: £3,000
• Monitor setup: £1,500
• Total: £4,500 (100% AIA)

Taxable profit: £88,000 - £4,500 = £83,500

Corporation Tax (approx): £17,500

Taking Money Out

Salary Strategy

Most developers take:

``` Salary: £12,570 (personal allowance) Employer's NIC: £0 (below threshold) ```

This gives:

• National Insurance credits
• Deductible expense for company
• No tax on salary

Dividend Strategy

Remaining profits can be:

``` Trading profit £88,000 Less: Corporation Tax (£17,500) Less: Salary (£12,570) Available for dividends £57,930 ```

Dividend tax rates (2024/25):

• £500 allowance at 0%
• Basic rate: 8.75%
• Higher rate: 33.75%
• Additional rate: 39.35%

Retained Profits

You don't have to extract all profits:

• Leave money in company for growth
• Pay down business loans
• Build cash reserves
• Only pay 19-25% (not dividend tax too)

IR35 Impact on CT600

If caught by IR35:

Before IR35:

• Company receives gross £100,000
• Pays Corporation Tax on profit
• Director takes salary + dividends

After IR35:

• Client deducts tax/NIC
• Company receives net (much less)
• Different CT600 calculation

The CT600 still needs filing but profits will be lower.

Record Keeping

Essential records for developers:

1. Contracts - All client agreements
2. Invoices - Sent and received
3. Bank statements - All transactions
4. Equipment receipts - For capital allowances
5. Subscription records - Monthly/annual tools
6. Mileage logs - If claiming travel
7. Time records - For R&D claims especially

Keep for at least 6 years.

Common Mistakes

1. Missing Equipment Claims

Wrong: Expensing equipment directly Right: Claim capital allowances for 100% relief

2. Ignoring R&D Credits

Wrong: Not claiming qualifying development work Right: Review projects for R&D eligibility

3. Poor Home Office Records

Wrong: Claiming without calculation Right: Keep utility bills, calculate business proportion

4. Missing Training Costs

Wrong: Not claiming course fees Right: Training for current trade is deductible

When Using TinyTax

TinyTax makes developer CT600s straightforward:

• Import trial balance from accounting software
• Handles capital allowances correctly
• Calculates trading profit accurately
• Clear, understandable output

Related Articles

• CT600 for IT Consultants: Complete Guide
• CT600 Boxes Explained: Understanding Every Field
• How to File a CT600 Online: Step-by-Step Guide

Need Help?

Software developers have specific tax opportunities like R&D credits and equipment allowances. TinyTax guides you through the CT600 process.

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