Corporation tax is the UK tax on the profits of limited companies and certain other organisations. For the financial year starting 1 April 2026, the main rate is 25% on profits over £250,000. Companies with profits of £50,000 or less pay the small profits rate of 19%, and marginal relief applies between the two. A company must tell HMRC it is active within 3 months of starting business. It must normally pay its tax 9 months and 1 day after the end of its accounting period and file its Company Tax Return within 12 months. Unlike income tax, there is no personal allowance. Corporation tax is charged on the company's taxable profit from the first pound.
Who pays corporation tax
According to HMRC's guidance, corporation tax is paid by:
- UK limited companies;
- Foreign companies with a UK branch or office. A company that is not UK resident pays only on profits from its UK activities;
- Clubs, co-operatives and other unincorporated associations, such as community groups and sports clubs.
Sole traders and partnerships do not pay corporation tax. Their profits are taxed as the owners' income through Self Assessment. If you are deciding between the two, see sole trader vs limited company. A UK-resident company is taxed on its worldwide profits, subject to double tax relief and specific exemptions.
What corporation tax is charged on
"Taxable total profits" bring together three main sources:
- Trading profits. Income from doing business, less allowable expenses;
- Investment income. For example, interest and rental income;
- Chargeable gains. Profit from selling assets such as property or shares for more than they cost.
The starting point is the profit in the company's accounts, but the two figures are rarely the same. HMRC's guidance stresses that the profit for corporation tax "is different from the profit or loss shown in your annual accounts". Typical adjustments are:
- Depreciation is added back and replaced by capital allowances. The £1 million annual investment allowance gives a 100% deduction for most plant and machinery. Companies can also claim full expensing on new, unused main-rate plant and machinery (cars excluded). The main pool writing-down allowance fell from 18% to 14% from 1 April 2026;
- Entertaining and other disallowable costs are added back;
- Dividends received are usually exempt;
- Losses from other periods, and reliefs such as research and development relief, reduce the taxable figure where the conditions are met.
Dividends paid to shareholders are not deductible. They come out of profit that has already been taxed.
Corporation tax rates for 2026/27
| Taxable profits (12-month period, no associated companies) | Rate |
|---|---|
| £50,000 or less | 19% small profits rate |
| £50,001 to £250,000 | 25% main rate, reduced by marginal relief |
| Over £250,000 | 25% main rate |
These rates have applied since 1 April 2023. Finance Act 2025 set them for the financial year 2026, and Finance Act 2026 has already set the same rates for the financial year starting 1 April 2027. The £50,000 and £250,000 limits are divided by the number of associated companies plus one, and reduced proportionately for accounting periods shorter than 12 months. Marginal relief means profits in the middle band are effectively taxed at 26.5% at the margin. Our corporation tax rates guide covers that calculation in full, with worked examples.
Key deadlines
| Obligation | Deadline |
|---|---|
| Tell HMRC the company is active (register for corporation tax) | Within 3 months of starting to do business |
| Pay corporation tax (profits up to £1.5 million) | 9 months and 1 day after the end of the accounting period |
| Pay corporation tax (large companies, profits over £1.5 million) | Quarterly instalments, starting during the period |
| File the Company Tax Return (CT600) with accounts and computations | 12 months after the end of the accounting period |
The payment deadline comes before the filing deadline. Many companies file early so they know the bill before they pay it. An accounting period for corporation tax cannot be longer than 12 months. If the company's accounts cover a longer period, for example its first 15 months, there are two tax periods, two returns and two payment dates. Large companies paying by quarterly instalments are covered in our guide to corporation tax instalments. For how to pay, see how to pay corporation tax.
Penalties and interest
- Late filing. For returns with a filing date on or after 1 April 2026, the penalty is £200 on day one and another £200 at three months. The penalties rise to £1,000 each if the return is late three times in a row. At six months HMRC can estimate the tax and add 10% of the unpaid tax, and another 10% at twelve months;
- Late payment. Interest runs from the due date at the Bank of England base rate plus 4%;
- Errors. Inaccurate returns can attract penalties based on the tax understated and the behaviour behind the error.
Dormant and newly formed companies
A company that has been formed but is not yet trading is usually dormant for corporation tax. Examples include a new company with no activity, or one formed only to hold an asset. Once it starts to do business, such as trading, providing services, earning interest or managing investments, it is within the charge to corporation tax and the 3-month notification clock starts. Its first accounting period begins on the date it becomes active, not the date of incorporation.
Getting it right
Corporation tax is self-assessed. The company works out its own liability, and its directors are responsible for reporting and paying the right amount on time. Acumon's corporation tax advisers prepare computations and CT600 returns and review reliefs and allowances. Our tax compliance team keeps the filing and payment calendar on track.