What You Need to Know About Rates, Deadlines, and Compliance
Corporation Tax is a fundamental part of running a business in the UK. Whether you’re a limited company, a foreign company with a UK branch, or a club or co-operative, understanding how Corporation Tax works is essential for staying compliant and avoiding penalties. In this blog, we break down the key points every business should know about Corporation Tax in the UK—covering who pays it, how it’s calculated, the current rates, and filing responsibilities.
What is Corporation Tax?
Corporation Tax is a tax on the profits made by UK companies and certain organisations. Unlike individuals, businesses don’t receive a tax-free personal allowance. Instead, they pay tax on all their profits—including trading income, investment income, and chargeable gains (profits from selling assets like property or shares).
Corporation Tax is administered by HM Revenue & Customs (HMRC), and it’s the company’s responsibility to calculate and pay the correct amount. This makes it different from PAYE (Pay As You Earn), where income tax is deducted from employees’ wages.
Who Pays Corporation Tax?
The tax applies to:
- UK limited companies
- Foreign companies with UK branches or offices
- Clubs, co-operatives, and other unincorporated associations
Sole traders and partnerships don’t pay Corporation Tax; instead, they pay Income Tax through Self Assessment.Corporation Tax Rates
From 1 April 2023, the Corporation Tax main rate is 25% for companies with profits over £250,000. Companies with profits of £50,000 or less continue to pay a small profits rate of 19%.
For businesses earning between £50,001 and £250,000, marginal relief applies—meaning the rate is gradually increased between 19% and 25%. Marginal relief helps ease the jump from the small profits rate to the main rate, based on the level of profit.
Corporation Tax Rates
From 1 April 2023, the Corporation Tax main rate is 25% for companies with profits over £250,000. Companies with profits of £50,000 or less continue to pay a small profits rate of 19%.
For businesses earning between £50,001 and £250,000, marginal relief applies—meaning the rate is gradually increased between 19% and 25%. Marginal relief helps ease the jump from the small profits rate to the main rate, based on the level of profit.
Key Deadlines and Responsibilities
Here are the main Corporation Tax tasks and their deadlines:
- Register for Corporation Tax: You must register with HMRC within 3 months of starting to trade.
- Prepare and file your Company Tax Return (CT600): Usually due 12 months after the end of your accounting period.
- Pay Corporation Tax: Payment is due 9 months and 1 day after the end of your accounting period.
For example, if your accounting period ends on 31 March 2025, your Corporation Tax payment will be due by 1 January 2026, and your return must be filed by 31 March 2026.
How to File and Pay
Filing is done online through HMRC’s Corporation Tax online service or using compatible software. You’ll need to include:
- Your company’s accounts
- A completed CT600 form
- Calculations showing how you arrived at your tax figure
Payment can be made through various methods, including online banking, direct debit, or corporate credit card. Timely payment is crucial—late payments result in interest charges and possible penalties.
Allowable Expenses and Deductions
To reduce your Corporation Tax liability, you can deduct allowable business expenses, including:
- Staff salaries and pensions
- Office running costs
- Marketing and advertising
- Travel costs
- Business insurance
- Depreciation (via capital allowances)
Accurate bookkeeping and expense tracking are vital to ensure you claim all legitimate deductions.
Avoiding Penalties
Late filing or incorrect returns can lead to automatic penalties. These start at £100 and increase the longer you delay. Repeated late submissions can result in larger fines and potential scrutiny from HMRC.