Corporation tax is a crucial consideration for every UK limited company, with over 2 million businesses registered at Companies House as of 2025. Understanding how to calculate, pay, and report your corporation tax correctly is essential to staying compliant and managing your company’s finances efficiently.
| Corporation Tax Key Figures (2026/27) | Amount / Rate |
|---|---|
| Corporation Tax Main Rate | 25% |
| Small Profits Rate (profits up to £50,000) | 19% |
| Marginal Relief Threshold (upper limit) | £250,000 |
| Accounting Period Length | Up to 12 months |
| Corporation Tax Payment Deadline | 9 months and 1 day after end of accounting period |
| CT600 Filing Deadline | 12 months after end of accounting period |
What is Corporation Tax?
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Use Free Tax Calculator →Corporation tax is the tax charged on the profits of UK limited companies and other organisations such as clubs, societies, and associations. Unlike income tax, corporation tax is paid by the company itself, not by the shareholders or directors personally.
HM Revenue & Customs (HMRC) requires all limited companies to pay corporation tax on their taxable profits — this includes income from trading, investments, and capital gains. Understanding your corporation tax obligations is vital to avoid penalties and interest charges.
Corporation Tax Rates for 2026/26
For the financial year starting 1 April 2025, the corporation tax system applies different rates depending on your company's profits:
- Small Profits Rate: Companies with profits up to £50,000 pay 19% corporation tax.
- Main Rate: Companies with profits over £250,000 pay 25% corporation tax.
- Marginal Relief: Companies with profits between £50,001 and £250,000 pay a tapered rate between 19% and 25%, calculated using marginal relief.
This tiered system helps smaller companies benefit from a lower rate while larger companies pay the standard rate. If your company’s profits are close to the limits, it’s important to calculate your liability carefully to avoid unexpected tax bills.
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How to Calculate Your Corporation Tax
Calculating corporation tax involves determining your company’s taxable profits, then applying the relevant tax rate. Taxable profits are your accounting profits adjusted for tax purposes — some expenses might be disallowed, and some income exempt.
Start with your profit before tax figure from your company accounts. Then adjust for:
- Non-deductible expenses (e.g., client entertaining costs)
- Capital allowances (tax relief for qualifying business assets)
- Taxable investment income and gains
- Losses brought forward or carried back
Once you have your taxable profits, apply the small profits rate, main rate, or marginal relief calculation depending on your profit level.
Understanding Marginal Relief
If your profits fall between £50,001 and £250,000, marginal relief applies to give you a gradual increase in tax rate from 19% to 25%. The formula for marginal relief is:
Marginal Relief = (Upper Limit − Profits) × (Main Rate − Small Profits Rate) ÷ (Upper Limit − Lower Limit)
This relief reduces your corporation tax bill, so it’s important to include it if your profits are in this range. HMRC provides a calculator and detailed guidance on GOV.UK to assist with this.
Allowable Deductions and Reliefs
To reduce your corporation tax liability, it’s important to understand which expenses and reliefs you can claim. Typical allowable deductions include:
- Business expenses wholly and exclusively for your trade
- Staff salaries and employer National Insurance contributions
- Costs of goods purchased for resale
- Professional fees and subscriptions related to the business
- Capital allowances for plant, machinery, and equipment
Some reliefs you might be eligible for include:
- Research and Development (R&D) tax credits for innovative projects
- Patent Box regime for profits from patented inventions
- Loss reliefs, allowing you to offset losses against profits in other periods
It’s essential to keep accurate records and consult HMRC’s detailed guidance or a qualified accountant to maximise your deductions.
Filing Your Corporation Tax Return (CT600)
Every limited company must file a CT600 corporation tax return with HMRC, detailing your company’s income, expenses, and tax calculations for the accounting period. This return must be submitted online through HMRC’s Corporation Tax online service or via commercial software.
The deadlines to note are:
- Filing deadline: 12 months after the end of your accounting period
- Payment deadline: 9 months and 1 day after the end of your accounting period
Failing to meet these deadlines can result in penalties and interest charges, so it’s crucial to plan ahead. You can find the CT600 form and guidance on GOV.UK’s corporation tax pages.
Steps to File Your CT600 Online
- Register for HMRC’s online services if you haven’t already.
- Gather your company accounts and tax computations.
- Complete the CT600 form using HMRC’s online portal or approved software.
- Review your entries carefully to avoid errors.
- Submit the return before the deadline and keep confirmation.
- Pay any corporation tax due by the payment deadline.
If you need help, consider consulting an accountant or tax adviser to ensure accuracy.
Key Takeaways
- UK limited companies must pay corporation tax on their taxable profits, with rates ranging from 19% to 25% in 2026/26 depending on profit levels.
- Calculate your taxable profits accurately, including allowable deductions and applying marginal relief if applicable.
- File your CT600 corporation tax return within 12 months of your accounting period end and pay your tax within 9 months and 1 day to avoid penalties.
- Keep detailed financial records and consider professional advice to optimise your tax position and comply with HMRC requirements.
- Use official resources on GOV.UK and HMRC for up-to-date guidance and tools.
When does a limited company need to start paying corporation tax?
A limited company must register for corporation tax within 3 months of starting to trade or becoming active. Corporation tax payments and filings follow once the accounting period ends.
Can I offset trading losses against other income for corporation tax?
Trading losses can generally only be offset against other profits of the same company, either carried back or forward. They cannot be offset against personal income of shareholders.
What happens if I miss the corporation tax filing deadline?
HMRC imposes penalties starting at £100 for late returns, increasing with continued delay. Interest may also be charged on unpaid tax. It’s important to file on time or communicate with HMRC if you face difficulties.
Official Sources
* GOV.UK: Set up a business · * HMRC: Income Tax rates · * HMRC: Corporation Tax · * HMRC: VAT registration