What You Need to Know About United Kingdom Corporate Tax

The UK introduced a tiered Corporation Tax system in April 2023, splitting companies into a 19% small profits rate and a 25% main rate with marginal relief in between. That means your tax bill depends not just on how much you earn, but on which band your profits fall into. Below, you will find everything you need to calculate your liability, file your CT600, and meet HMRC deadlines.

1. What is Corporation Tax?

Corporation Tax is the tax that UK limited companies pay on their profits. It applies to all taxable income, including trading profits, investment income, and capital gains. The tax is self-assessed, meaning your company calculates its own tax bill and reports it to HMRC.

The current Corporation Tax rates are:

Small profits rate: 19% for companies with profits up to £50,000
Main rate: 25% for companies with profits above £250,000
Marginal relief: A sliding scale applies for profits between £50,000 and £250,000

2. Who does it apply to?

This usually applies to:

All UK limited companies (including single-director companies)
Foreign companies with a UK branch or office
Clubs, co-operatives, and unincorporated associations
Community interest companies and charitable companies (with some exemptions)
Holding companies and group structures

Note: Sole traders and partnerships do not pay Corporation Tax. They pay income tax through self-assessment instead.

3. Why does it matter?

Understanding Corporation Tax helps you:

Stay compliant with HMRC and avoid penalties
Avoid interest charges on late payments
Keep proper records for tax computations
File and pay correctly within the required deadlines
Plan your cash flow better by setting aside funds for your tax bill

4. How does it work?

Here's the basic process:

Register your company for Corporation Tax with HMRC within 3 months of starting to trade
Keep accurate financial records throughout your accounting period
Prepare your company accounts at the end of your financial year
Calculate your taxable profits (adjusting for allowable expenses, capital allowances, and reliefs)
Complete and file your CT600 return with HMRC
Pay your Corporation Tax bill by the deadline

5. What forms are involved?

CT600 (Corporation Tax Return) - The main tax return for UK companies, filed with HMRC to declare your taxable profits and Corporation Tax due
CT600A to CT600J - Supplementary pages for specific items like losses, group relief, and research and development claims
iXBRL accounts - Your company accounts must be filed in inline XBRL format alongside your CT600
Company Tax Computation - The detailed calculation showing how you arrived at your taxable profit

6. What information do you need?

Before handling Corporation Tax, make sure you have:

Your company's Unique Taxpayer Reference (UTR)
Statutory accounts prepared to the correct standards
Records of all income and expenditure
Capital allowance calculations for assets purchased
Details of any losses carried forward or group relief claims
Records of dividend payments and distributions
Research and development expenditure details (if claiming R&D tax relief)

7. Important deadlines

Filing frequency: Annually, after your company's accounting period ends
Payment deadline: 9 months and 1 day after the end of your accounting period
CT600 filing deadline: 12 months after the end of your accounting period
Year-end requirements: File statutory accounts with Companies House within 9 months

For example, if your accounting period ends on 31 March 2026:

Corporation Tax payment is due by 1 January 2027
CT600 filing deadline is 31 March 2027

Large companies (profits above £1.5 million) must pay Corporation Tax in quarterly instalments.

8. Common mistakes to avoid

Missing the payment deadline and incurring interest charges (currently the Bank of England base rate plus 2.5%)
Not claiming all allowable expenses and capital allowances
Confusing accounting profit with taxable profit
Failing to register for Corporation Tax within 3 months of starting to trade
Not filing your CT600 on time, which triggers an automatic £100 penalty
Overlooking R&D tax relief if your company undertakes qualifying activities
Not planning for the marginal relief band between £50,000 and £250,000

9. Simple example

Your company has an accounting period ending 31 March 2026.

Total revenue: £200,000
Allowable expenses: £120,000
Capital allowances: £10,000
Taxable profit: £200,000 - £120,000 - £10,000 = £70,000

Since your profit falls between £50,000 and £250,000, marginal relief applies.

Start with the main rate: £70,000 x 25% = £17,500
Marginal relief: 3/200 x (£250,000 - £70,000) = £2,700
Corporation Tax due: £17,500 - £2,700 = £14,800
Effective tax rate: approximately 21.1%

Payment is due by 1 January 2027. Your CT600 must be filed by 31 March 2027.

10. FAQ

Q: When do I start paying Corporation Tax? A: You become liable for Corporation Tax as soon as your company starts trading, earning income, or making capital gains.

Q: What is the difference between the small profits rate and the main rate? A: Companies with profits up to £50,000 pay 19%. Companies with profits above £250,000 pay 25%. Profits in between benefit from marginal relief, resulting in an effective rate between 19% and 25%.

Q: Can I carry forward losses? A: Yes. Trading losses can be carried forward indefinitely against future trading profits. You can also carry back losses one year for a tax refund.

Q: Do I file Corporation Tax separately from my company accounts? A: Yes. You file your company accounts with Companies House and your CT600 with HMRC. However, both require your statutory accounts as the starting point.

Q: What happens if I file my CT600 late? A: HMRC charges a £100 penalty if your return is up to 3 months late. After 3 months, another £100 penalty applies. After 6 months, HMRC estimates your tax and charges 10% of that amount. After 12 months, another 10% penalty applies.

11. Final takeaway

UK Corporation Tax is 19% for small profits and 25% for larger companies. Pay within 9 months and 1 day after your year-end, file your CT600 within 12 months, and claim all allowable expenses and reliefs to reduce your bill.

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What you need to know about United Kingdom Corporation Tax: Rates range from 19% to 25% depending on profits. File your CT600 within 12 months and pay within 9 months of your year-end.

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