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Corporation Tax is a direct tax that limited companies, foreign companies with a UK branch or office, and certain unincorporated associations (like clubs or co-operatives) must pay to HM Revenue and Customs (HMRC) on their profits. It is the company director’s responsibility to ensure it is calculated and paid correctly.
Profits subject to Corporation Tax
Taxable profits for Corporation Tax purposes include income from:
- Doing business (trading profits)
- Investments, such as interest or dividends from non-UK companies
- Selling assets for more than they cost (chargeable gains), such as land, property, equipment, machinery, or shares.
Sole traders and partnerships do not pay Corporation Tax; instead, they pay Income Tax on business profits via self-assessment.
Current Rates (as of November 2025)
The amount of Corporation Tax a company pays depends on the amount of profit it makes in an accounting period. The rates for non-ring fence profits are:
| Annual Profit Range | Tax Rate |
|---|---|
| £50,000 or less | 19% (small profits rate) |
| Between £50,000 and £250,000 | A tapered rate via Marginal Relief. This provides a gradual increase in the effective corporation tax rate between the small profits rate and the main rate. |
| £250,000 or more | 25% (main rate) |
These profit thresholds are proportionately reduced for short accounting periods and by the number of ‘associated companies’ a business has.
Key Responsibilities and Processes
- Self-Assessment: Companies do not receive a tax bill; they must calculate their own tax liability.
- Filing and Payment: A Company Tax Return (CT600 form) must be filed with HMRC within 12 months after the end of the accounting period. However, the tax owed must typically be paid sooner, by 9 months and 1 day after the end of the accounting period.
- Reducing the Bill: Companies can claim various allowances and reliefs, such as expenses for running the business or capital allowances for investments in equipment and machinery, to reduce their taxable profits.