Corporation Tax is the tax your limited company pays on its profits. Understanding the rates, what counts as taxable profit, and the reliefs available can make a significant difference to how much tax your company ultimately pays.
2025 Corporation Tax Rates at a Glance
Small Profits Rate
19%
On profits up to £50,000
Marginal Relief
19–25%
Profits £50,001–£250,000
Main Rate
25%
On profits over £250,000
Registering for Corporation Tax
You must register for Corporation Tax with HMRC within 3 months of starting to do business. This includes any of the following activities: trading, purchasing assets, renting property, employing staff, or advertising your services.
HMRC automatically sends a Unique Taxpayer Reference (UTR) to your registered office address within a few weeks of company formation. You use this UTR to register online through HMRC's business tax account. Do not wait until you have made a profit — register as soon as you start trading.
What Counts as Taxable Profit?
Taxable profit is broadly your company's total income minus allowable business expenses. Getting this right — claiming all legitimate deductions — is one of the most impactful ways to reduce your tax bill.
Allowable Deductions
- Director and staff salaries
- Employer NIC and pension contributions
- Office rent and utilities
- Business travel (not commuting)
- Professional fees (accountancy, legal)
- Marketing and advertising
- Equipment (via capital allowances)
- Software subscriptions
Not Deductible
- Client entertainment costs
- Personal or mixed-use expenses
- Fines and penalties
- Dividends paid to shareholders
- Capital expenditure (claim allowances instead)
- Personal travel with no business purpose
Key Deadlines
Key Tax Reliefs to Know
Annual Investment Allowance (AIA)
100% tax deduction on up to £1 million of qualifying plant and machinery purchased in the accounting period.
R&D Tax Credits
Generous reliefs for qualifying research and development expenditure. Particularly valuable for tech, scientific, and engineering businesses.
Trading Loss Relief
Losses can be carried back 1 year (reclaiming tax paid) or carried forward indefinitely against future profits.
Employer Pension Contributions
Pension contributions paid by the company are fully deductible and not treated as a benefit-in-kind for the director.
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