Corporation Tax Explained
How Corporation Tax works for UK limited companies — the rates, the marginal-relief band, the deadlines that catch directors out, and the legitimate ways to bring the bill down.
What Corporation Tax is
Corporation Tax is the tax a limited company pays on its profits — trading profits, investment income and chargeable gains. Unlike Income Tax it follows the financial year (1 April to 31 March), though your company can keep its own accounting period.
Sole traders, partnerships and LLPs do not pay Corporation Tax — they are taxed under Income Tax instead.
The rates — 19%, 25% and marginal relief
How much you pay depends on your profit:
- 19% small-profits rate on profits up to £50,000
- 25% main rate on profits over £250,000
- Between the two, marginal relief tapers the effective rate from 19% up towards 25%
- The £50,000 and £250,000 limits are shared between associated companies and reduced for short accounting periods
A standalone company making £100,000 profit pays an effective rate of about 22.75%.
Key dates to remember
Corporation Tax has an unusual quirk: you pay before you file.
- Register for Corporation Tax within 3 months of starting to trade
- Pay your bill 9 months and 1 day after your accounting period ends
- File your CT600 return within 12 months of the period end
- Very large companies pay in quarterly instalments
Payment is due before the filing deadline — a common and costly trap.
Legitimate ways to reduce your bill
Most overpayment comes from reliefs that were never claimed:
- Claim every allowable business expense
- Capital allowances — the Annual Investment Allowance gives 100% relief on up to £1m of qualifying plant and equipment
- R&D tax relief if you are developing products or processes
- Employer pension contributions are a deductible cost
- Carry trading losses back or forward against profits
Reliefs are claimed, not given automatically — the savings are in the detail.
Director's loans and the s455 charge
Money you take out that is not salary, a dividend or an expense repayment is a director's loan. If your loan account is overdrawn more than nine months and one day after year-end, the company pays a temporary 33.75% S455 charge until it is repaid.
- Repay within 9 months and 1 day of year-end to avoid the charge
- Loans over £10,000 can create a benefit-in-kind
- The S455 charge is refundable once the loan is repaid — but slowly
Common questions
When is Corporation Tax due?
Payment is due 9 months and 1 day after your accounting period ends, and the CT600 return within 12 months. Note that payment comes before the filing deadline.
What is the Corporation Tax rate for 2025/26?
19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief tapering the effective rate in between.
How can I reduce my Corporation Tax bill?
Claim all allowable expenses and capital allowances, make employer pension contributions, and check whether R&D relief applies. The savings come from claiming reliefs you are entitled to.
Get expert eyes on your tax
Book a free 30-minute Tax Health Check — we review your situation, sense-check the figures and show you where you could save.
For guidance only — this factsheet does not constitute professional advice and is not a substitute for advice based on your specific circumstances. Whilst every care has been taken in its preparation, it may contain errors for which we cannot be responsible. Figures are for the 2025/26UK tax year (England, Wales & Northern Ireland) and may change. Last reviewed 6 June 2026.