If you run a private limited Company, Corporation Tax comes with the territory. The good news is that the basics are fairly straightforward. The slightly less good news is that HMRC won't send you a bill. It's up to your company to work out what it owes, pay it on time and report it. Here's what you need to know.
Who pays Corporation Tax?
Corporation Tax is paid to HMRC on the profits a company or organisation makes in its accounting period. It applies to:
- Limited companies
- Foreign companies with a UK branch or office
- Clubs, co-operatives and other unincorporated associations, such as community groups and sports clubs
Sole traders and partnerships don't pay it. They report their business profits through Self Assessment instead.
What profits are taxed?
Taxable profits include money your company makes from:
- trading
- investments
- selling assets for more than they cost (known as "chargeable gains")
Where your company is resident matters. A company that's UK resident for tax purposes pays Corporation Tax on all its profits, from the UK and abroad. A non-resident company with a UK office or branch only pays on profits from its UK activities.
One point that surprises people: the profit figure used for Corporation Tax isn't necessarily the same as the one in your annual accounts. HMRC is clear that the two are different, which is one of the reasons the tax calculation deserves some care.
How much is it?
For profits from 1 April 2023, there are two headline rates:
| Taxable profits | Rate |
|---|---|
| £50,000 or less | 19% (the "small profits rate") |
| Between £50,000 and £250,000 | 25%, reduced by Marginal Relief |
| More than £250,000 | 25% (the main rate) |
Marginal Relief smooths the jump between the two rates, so companies in the middle band pay an effective rate somewhere between 19% and 25%.
The £50,000 and £250,000 thresholds aren't fixed for everyone. They're reduced proportionately if your accounting period is shorter than 12 months, and if your company has "associated companies". Running more than one company? This is worth checking carefully.
If your accounting period straddles 1 April and the rate changes, the profits are split by the number of days each rate applied.
Reducing the bill: allowances and reliefs
What you can claim depends on the nature of your business and its assets, but common examples include:
- Capital allowances on assets you keep and use in the business, such as equipment, machinery and business vehicles
- Research and Development (R&D) Relief
- The Patent Box, for profits from patented inventions
- Creative industry reliefs for theatre, film, television, animation and video games
- Relief for trading losses
A word of caution: anything you or your employees get personal use from must be treated as a benefit, not a business cost.
Registering
When you register a new company with Companies House, you'll get the option to set up Corporation Tax at the same time. If you don't, you'll need to add Corporation Tax services to your business tax account separately. Clubs and other unincorporated associations register in a different way.
If a company isn't doing business, it's usually treated as dormant for Corporation Tax.
Your accounting period
Your accounting period is the time covered by your Company Tax Return. It can't be longer than 12 months, and it's normally the same as the financial year covered by your annual accounts.
There are a few exceptions. Your first year may be split into two accounting periods, and if your accounts ever cover more than 12 months (for example, after lengthening your year end), you'll need to file two returns to cover them.
Two deadlines that matter
Here's the part that catches people out: you pay before you file.
Payment: if your taxable profits are up to £1.5 million, Corporation Tax is due
9 months and 1 day after the end of your accounting period. Companies with profits above £1.5 million pay in instalments instead.
Filing: your Company Tax Return is due 12 months after the end of the accounting period it covers.
So for a year ending 31 March 2026, the tax is due by 1 January 2027 and the return by 31 March 2027. Mind that festive-season deadline.
Returns should be filed online, and you must still file one if your company made a loss or has no tax to pay. If you've nothing to pay, you also need to tell HMRC.
What happens if you're late?
HMRC's late filing penalties build up over time:
| Time after the deadline | Penalty |
|---|---|
| 1 day | £200 |
| 3 months | Another £200 |
| 6 months | HMRC estimates your tax bill and adds 10% of the unpaid tax |
| 12 months | Another 10% of any unpaid tax |
If your return is late three times in a row, the £200 penalties rise to £1,000 each. Once a return is six months late, HMRC issues a "tax determination" of what it thinks you owe, and this can't be appealed.
Paying late can also mean interest charges. On the brighter side, HMRC pays credit interest if you pay early.
Keeping records
Behind all of this sits one simple obligation: keeping proper company and accounting records. Good records make the return easier to prepare, the tax easier to calculate, and any questions from HMRC much easier to answer.
How can we help?
The basics of Corporation Tax are manageable, but the detail, from Marginal Relief and associated companies to capital allowances and loss claims, is where real savings (and costly mistakes) tend to lie.
If you'd like help preparing your Company Tax Return, planning ahead for payment deadlines, advisory services or making sure you're claiming everything you're entitled to, get in touch to arrange a consultation.
This article is a general overview of Corporation Tax based on HMRC guidance published on GOV.UK as at September 2026. Rates, thresholds and reliefs can change, and the right treatment for your company will depend on its circumstances. It isn't tax advice, so please speak to us before acting on anything covered here. Higginson James Limited accepts no liability for any loss arising from reliance on this article.