If you run a limited company in the UK, Corporation Tax (CT) is one of your most important obligations. Unlike income tax, which you pay personally, Corporation Tax is levied on your company's profits. Understanding how it works, the rates that apply, and the deadlines involved is fundamental to running your business compliantly.
What is Corporation Tax?
Corporation Tax is a tax charged on the taxable profits of UK limited companies, foreign companies with a UK branch or office, and certain other organisations. It applies to profits from trading, investments, and the sale of assets (known as "chargeable gains").
Corporation Tax is collected by HMRC (His Majesty's Revenue and Customs) and is distinct from the personal taxes that directors pay on their salary and dividends.
Current Corporation Tax Rates (2025)
The Corporation Tax rate structure changed significantly in April 2023:
- Small profits rate: 19% on profits up to £50,000
- Main rate: 25% on profits over £250,000
- Marginal relief: For profits between £50,000 and £250,000, a tapered rate applies — effective rates gradually increase from 19% to 25%
- The £50,000 and £250,000 thresholds are divided by the number of "associated companies" you control
When Must You Register for Corporation Tax?
You must register your company for Corporation Tax with HMRC within 3 months of starting to do business. "Starting to do business" includes trading, purchasing assets, renting premises, or advertising your services — not just making your first sale.
Registration is done online via HMRC's website using your company's Unique Taxpayer Reference (UTR), which HMRC sends automatically to your registered office address within a few weeks of company formation.
What Counts as Taxable Profit?
Taxable profit is broadly your company's revenue minus allowable business expenses. Common deductible expenses include:
- Director and staff salaries (including employer National Insurance and pension contributions)
- Office rent, utilities, and business rates
- Business travel and subsistence
- Marketing and advertising costs
- Professional fees (accountancy, legal advice)
- Business equipment and software (subject to capital allowances)
- Employer pension contributions
Key Corporation Tax Deadlines
Missing Corporation Tax deadlines results in penalties and interest charges. The critical dates are:
- File your Company Tax Return (CT600): Within 12 months of the end of your accounting period
- Pay any Corporation Tax owed: Within 9 months and 1 day of the end of your accounting period
- For large companies (profits over £1.5m): Quarterly instalment payments apply instead
Accounting Period vs. Tax Year
Your company's accounting period is typically 12 months and usually ends on the anniversary of incorporation. Unlike sole traders who file on the tax year (5 April), limited company tax returns are based on your specific accounting year end. You can change your accounting year end date, but this requires notifying both Companies House and HMRC.
Corporation Tax Reliefs to Be Aware Of
Several reliefs can reduce your Corporation Tax bill:
- Research and Development (R&D) relief: Generous tax credits for qualifying R&D expenditure
- Annual Investment Allowance (AIA): 100% tax deduction on up to £1m of qualifying plant and machinery in the year of purchase
- Creative industry reliefs: Available for qualifying video games, film, TV, and theatre productions
- Trading losses: Losses can be carried back or forward to offset against profits in other periods
Frequently Asked Questions
What is the Corporation Tax rate in the UK in 2025?
For the 2025 tax year, the small profits rate is 19% on profits up to £50,000, and the main rate is 25% on profits over £250,000. Marginal relief applies for profits between £50,000 and £250,000.
When do I pay Corporation Tax?
Corporation Tax is due 9 months and 1 day after the end of your accounting period. For example, if your accounting year ends on 31 December 2024, your payment is due by 1 October 2025.
Do I need to pay Corporation Tax if my company makes a loss?
No Corporation Tax is due on a loss-making year. You can carry the loss back to offset profits from the previous year (and claim a refund) or carry it forward to reduce future profits.
What happens if I miss the Corporation Tax deadline?
HMRC charges an automatic £100 penalty for a late return, rising to £200 after 3 months. Interest is charged on any unpaid tax from the due date. Persistent non-compliance can result in much larger penalties.
Does my limited company need to pay Corporation Tax even if I pay myself only dividends?
Yes. Dividends are paid from after-tax profits, so Corporation Tax is always levied on the company's profits before dividends are declared.
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