What is Corporation Tax in the UK?

Corporation Tax is a tax on the profits of UK limited companies and other organisations. The company pays tax on its taxable profits (revenue minus allowable expenses) at 19% for small profits or 25% for profits over £250,000.

What is the Corporation Tax rate for 2026-27?

19% for profits up to £50,000, 25% for profits above £250,000. Between £50,000 and £250,000, marginal relief applies so you pay a tapered rate.

When do I pay Corporation Tax?

Corporation Tax is due 9 months and 1 day after your accounting year end. Your Corporation Tax return is due 12 months after your year end.

What is Corporation Tax?

Corporation Tax is a tax paid by UK limited companies and other organisations on their annual profits.

Quick Answer: Corporation Tax is charged on the taxable profits of UK limited companies. For the 2026-27 tax year, companies pay 19% on profits up to £50,000, rising to 25% for profits above £250,000. Tax is due 9 months and 1 day after your accounting year end. It's separate from Income Tax and only applies to incorporated businesses.

Last reviewed: 12 June 2026 | Reading time: 8 minutes | Verified against 8 sources

How Corporation Tax Works

Corporation Tax applies to the profits of:

UK limited companies (Ltd, PLC)
Foreign companies with a UK branch or office
Clubs, societies, and associations
Trade associations and housing associations

It does not apply to sole traders or partnerships. Those structures pay Income Tax instead.¹

Taxable profit is calculated as revenue (all income) minus allowable business expenses. Allowable expenses include salaries, rent, stock, equipment, professional fees, and most costs incurred "wholly and exclusively" for business purposes.²

Corporation Tax Rates 2026-27

The UK operates a tiered Corporation Tax system:

Taxable Profit	Rate	Details
Up to £50,000	19%	Small profits rate³
£50,001 - £250,000	19% - 25%	Marginal relief applies (tapered rate)⁴
Over £250,000	25%	Main rate³

Marginal relief means companies with profits between £50,000 and £250,000 pay a gradually increasing effective rate, not a sudden jump to 25%.

Example Calculations

Small company (£30,000 profit):
£30,000 × 19% = £5,700 Corporation Tax

Medium company (£100,000 profit):
Falls in marginal relief band. Effective rate approximately 21.5%.
Corporation Tax ≈ £21,500

Larger company (£300,000 profit):
£300,000 × 25% = £75,000 Corporation Tax

When You Pay Corporation Tax

Deadlines are based on your company's accounting period (usually 12 months, ending on your chosen year-end date):

Payment deadline: 9 months and 1 day after the end of your accounting period⁵
Corporation Tax return deadline: 12 months after the end of your accounting period⁵
Example timeline (year end 31 March 2027): Pay by 1 January 2028, file return by 31 March 2028
Payment method: Electronic payment via HMRC online, bank transfer, or Direct Debit

Very large companies (profits over £1.5 million) pay Corporation Tax in quarterly instalments during the accounting period itself.⁶

What Counts as Taxable Profit?

You calculate taxable profit by taking your revenue and subtracting allowable expenses.

Revenue (Income)

Sales of goods or services
Interest received
Rental income from property owned by the company
Profits from selling assets (chargeable gains)

Allowable Expenses

Employee salaries and wages (including director salaries)
Employer National Insurance and pension contributions
Rent and business rates
Stock and raw materials
Office costs (utilities, stationery, software subscriptions)
Marketing and advertising
Professional fees (accountant, lawyer)
Capital allowances (depreciation on equipment and vehicles)⁷

Non-Allowable Expenses

You cannot deduct:

Dividends paid to shareholders
Client entertainment
Fines and penalties
Costs not incurred wholly for business purposes

Corporation Tax vs Income Tax

These are distinct taxes serving different purposes:

Aspect	Corporation Tax	Income Tax
Charged on	Company profits	Personal income (salary, dividends)
Who pays	The limited company itself	Individual directors/shareholders
Rate (2026-27)	19% - 25%	0% - 45% (progressive bands)
When paid	9 months after year end	Via PAYE monthly, or Self Assessment by 31 Jan

As a company director, you encounter both taxes. The company pays Corporation Tax on profits. You personally pay Income Tax when you take money out as salary or dividends.⁸

Filing Your Corporation Tax Return

You must file a Corporation Tax return (form CT600) even if you made no profit or the company was dormant.

The return includes:

Your profit and loss account
Balance sheet
Detailed calculation of taxable profit
Any adjustments (adding back non-allowable expenses, capital allowances)

Most small companies file online using HMRC-compatible software or via an accountant. Filing late triggers automatic penalties starting at £100.⁵

How to Pay Less Corporation Tax (Legally)

Reduce your Corporation Tax bill by:

Claim all allowable expenses. Keep detailed records and receipts.
Use capital allowances. Get tax relief on equipment, computers, vehicles.
Contribute to a company pension. Employer pension contributions are deductible.
Pay yourself a salary. Reduces profit and uses your personal allowance efficiently.
Timing of expenses. Purchase needed equipment before year-end to reduce current-year profit.
Carry forward losses. Trading losses can offset future profits.²

Penalties for Late Payment or Filing

HMRC charges penalties and interest if you miss deadlines:

Late filing penalty: £100 if up to 3 months late, increasing to £200+ for longer delays⁵
Late payment interest: Interest charged daily on unpaid tax (rate varies, typically 2.5% - 4% per year)
Repeated late filing: HMRC can charge tax-geared penalties (percentage of the tax due)

Registering for Corporation Tax

When you register a limited company with Companies House, HMRC automatically sends you a letter with:

Your company's Unique Taxpayer Reference (UTR)
Instructions for activating your Corporation Tax online account

This usually arrives within 2-3 weeks of incorporation. You must tell HMRC when your company starts trading (within 3 months) using form CT41G if you incorporate but don't trade immediately.¹

Sources

HMRC — Corporation Tax overview, accessed 2026-06-12
HMRC — Allowable business expenses, accessed 2026-06-12
HMRC — Corporation Tax rates and allowances 2026-27, accessed 2026-06-12
HMRC — Marginal relief for Corporation Tax, accessed 2026-06-12
GOV.UK — Filing Corporation Tax returns and deadlines, accessed 2026-06-12
HMRC — Paying Corporation Tax in instalments, accessed 2026-06-12
HMRC — Capital allowances explained, accessed 2026-06-12
GOV.UK — Running a limited company (tax responsibilities), accessed 2026-06-12

Last reviewed: 12 June 2026