What is Corporation Tax?
Corporation Tax is the tax companies pay on profits. Here is how the rates and bands work from April 2023 onwards.
In one sentence
Corporation Tax is the tax UK limited companies pay on profits, 19% on profits up to £50,000, 25% on profits above £250,000, with marginal relief in between (since April 2023).
Quick answer
- 19% small profits rate: profits up to £50,000
- 25% main rate: profits above £250,000
- Marginal relief between £50,000 and £250,000
- Thresholds are divided by the number of associated companies
What is UK Corporation Tax?
Corporation Tax is the direct tax levied by HMRC on the taxable profits made by UK limited companies, foreign companies with UK branches, and corporate associations (such as clubs and co-operatives).
Unlike sole traders who pay Income Tax on business profits via Self Assessment, a limited company is a separate legal entity. The company itself pays Corporation Tax on its net profit before any dividends are paid to shareholders.
What profits is Corporation Tax charged on?
Taxable profits include money the company makes from trading, from investments, and from selling assets for more than they cost (chargeable gains). A UK-resident company pays Corporation Tax on all its profits from the UK and abroad. A company that is not UK resident but has a UK office or branch pays only on its UK activities.
There is no Corporation Tax bill from HMRC: the company works out the tax in its Company Tax Return and pays it by the deadline.
UK Corporation Tax rates for 2026/27
Corporation Tax rates are structured into three main tiers based on your company's annual taxable profit:
| Profit band | Corporation Tax rate | How it works |
|---|---|---|
| Up to £50,000 | 19% Small Profits Rate | Applies to small companies with taxable profit up to £50,000 |
| £50,001 to £250,000 | 19% to 25% (Marginal Relief) | Main 25% rate applies, reduced by Marginal Relief (effective marginal rate 26.5%) |
| Over £250,000 | 25% Main Rate | Full 25% tax applies to all taxable profits |
The Associated Companies rule
The £50,000 and £250,000 profit thresholds are divided by the total number of associated companies controlled by the same person or group of people.
For example, if you own 100% of two separate active trading limited companies:
- The Small Profits Rate threshold drops from £50,000 to £25,000 per company.
- The Main Rate threshold drops from £250,000 to £125,000 per company.
Dormant companies and passive holding companies without business activity are excluded from the associated company count, but active group entities must be counted.
Worked calculation: £100,000 taxable profit
For a standalone limited company with a taxable profit of £100,000, tax is calculated using the main rate minus Marginal Relief:
- Step 1 (Main Rate calculation): £100,000 × 25% = £25,000
- Step 2 (Marginal Relief deduction): 3/200 × (£250,000 - £100,000) = 0.015 × £150,000 = -£2,250
- Step 3 (Final Tax Owed): £25,000 - £2,250 = £22,750 (effective rate 22.75%)
How much Corporation Tax will my company pay?
It depends on taxable profit, not turnover. For a standalone company with a 12-month accounting period:
| Taxable profit | How it is worked out | Corporation Tax | Effective rate |
|---|---|---|---|
| £30,000 | 19% of £30,000 | £5,700 | 19% |
| £60,000 | 25% of £60,000 = £15,000, less Marginal Relief of 3/200 x £190,000 = £2,850 | £12,150 | 20.25% |
| £150,000 | 25% of £150,000 = £37,500, less Marginal Relief of 3/200 x £100,000 = £1,500 | £36,000 | 24% |
| £300,000 | 25% of £300,000 | £75,000 | 25% |
The limits are lower if you control other companies or your accounting period is shorter than 12 months. See the Corporation Tax rates for 2026/27.
How accounting profit becomes taxable profit
Corporation Tax is calculated on taxable profit, which is usually different from the net profit shown on your profit and loss account:
- Start with Accounting Profit: Your gross revenue minus allowable business expenses and staff salaries.
- Add Back Disallowed Expenses: Client entertaining, legal costs for capital purchases, non-trade donations, and book depreciation.
- Deduct Capital Allowances: Annual Investment Allowance (AIA) or Full Expensing on qualifying plant and machinery instead of depreciation.
- Apply Tax Losses: Deduct brought-forward trading losses or group relief.
- Multiply by Tax Rate: Calculate Corporation Tax due on the net figure.
Filing and payment deadlines for Corporation Tax
Corporation Tax compliance has two separate deadlines that catch many business owners:
- Payment Deadline: 9 months and 1 day after the end of your company accounting period. (For example, if your financial year ends 31 March, tax is due 1 January).
- Filing CT600 Return Deadline: 12 months after the end of your accounting period.
Notice that the payment deadline comes before the filing deadline. Paying late triggers automatic interest charges from HMRC.
Companies with taxable profits over £1.5 million pay in instalments instead of one payment. How to pay is covered in how to pay HMRC.
Read our guide on Corporation Tax accounting services or use our free Company Profit & Corporation Tax Calculator to estimate your tax bill.
Official source
GOV.UK: Corporation Tax rates, expenses and reliefsNeed help with Corporation Tax or CT600 filing?
Book a 30-minute call with an experienced UK accountant. We will review your allowable deductions, capital allowances, associated companies, and Corporation Tax return.
Book a call →Frequently asked questions
What is the Corporation Tax rate in the UK?
For 2026/27 the main rate is 25% on profits over £250,000 and the small profits rate is 19% on profits of £50,000 or less. Between £50,000 and £250,000 you pay the main rate reduced by Marginal Relief, so the rate rises gradually from 19% towards 25%. The £50,000 and £250,000 limits are reduced for short accounting periods and for each associated company.
How is Corporation Tax calculated?
Work out your taxable profit first: start with the accounting profit, add back expenses that are not allowed, deduct capital allowances and any losses. Then apply the rate that fits your profit band. If profit is £50,000 or less it is 19%, over £250,000 it is 25%, and in between it is 25% less Marginal Relief of 3/200 of the amount by which profit falls below £250,000.
How much Corporation Tax will my company pay?
It depends on taxable profit, not turnover. For a standalone company with a 12-month accounting period, £30,000 of taxable profit gives £5,700, £60,000 gives £12,150, £100,000 gives £22,750, £150,000 gives £36,000 and £300,000 gives £75,000. Associated companies lower the limits, so the figures change if you control more than one company.
Who pays Corporation Tax?
UK limited companies, foreign companies with a UK branch or office, and clubs, co-operatives and other unincorporated associations pay Corporation Tax on their profits. Sole traders and partners do not: they pay Income Tax on business profits through Self Assessment.
What profits is Corporation Tax charged on?
Taxable profits include trading profits, investment income and chargeable gains from selling assets for more than they cost. A UK-resident company pays Corporation Tax on its profits from the UK and abroad.
Does HMRC send a Corporation Tax bill?
No. You do not get a bill for Corporation Tax. You must keep accounting records, prepare a Company Tax Return to work out the tax, and pay by your deadline, or tell HMRC that nothing is due. You must file the return even if you make a loss or owe nothing.
When is Corporation Tax due?
If your taxable profits are £1.5 million or less, you pay 9 months and 1 day after the end of your accounting period. The Company Tax Return is due 12 months after the period ends. Companies with taxable profits over £1.5 million pay in instalments.
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