A UK limited company pays corporation tax on its profits, plus VAT if turnover exceeds £90,000, employer National Insurance and PAYE if it has staff, and business rates if it occupies commercial premises. As a director and shareholder, you then pay dividend tax and personal income tax on the money you take out. So there are really two layers: tax the company pays, and tax you pay personally.
Below are the main taxes for the 2026/27 tax year, with current rates and thresholds.
How much corporation tax does a limited company pay?
A limited company pays corporation tax on its profits at 19% on the first £50,000, and 25% on profits over £250,000, per HMRC. Profits between £50,000 and £250,000 are taxed at 25% with marginal relief, giving an effective rate that rises gradually from 19% towards 25%. It is the headline tax every company pays on trading income, investment income and gains.
For the 2026/27 financial year the rates are:
| Taxable profit | Corporation tax rate (2026/27) |
|---|---|
| £0 to £50,000 | 19% (small profits rate) |
| £50,001 to £250,000 | 25% less marginal relief (effective ~26.5% on the band) |
| Over £250,000 | 25% (main rate) |
These limits are shared between associated companies, if you control more than one company, the £50,000 and £250,000 thresholds are divided between them, so smaller companies can tip into the higher rate sooner than expected.
You must file a CT600 return and pay corporation tax 9 months and 1 day after your accounting period ends. There's no payment-on-account system for most small companies, but very large companies pay in instalments.
Want this handled properly? Our corporation tax services cover the calculation, filing and planning to keep your bill as low as legitimately possible.
VAT
A limited company must register for VAT once its taxable turnover passes the £90,000 threshold in any rolling 12-month period (or if you expect to cross it in the next 30 days). You can also register voluntarily below that.
The standard VAT rate is 20%, with reduced (5%) and zero rates for certain goods and services. Once registered you charge VAT on sales, reclaim VAT on purchases, and submit returns, usually quarterly, under Making Tax Digital.
VAT is collected on behalf of HMRC, so it isn't a cost to the business, but it is a cash-flow and compliance responsibility you can't ignore once you're registered.
What employer National Insurance and PAYE does a company pay?
If your company employs anyone, including you as a director on a salary, it runs PAYE and pays employer (secondary) National Insurance contributions.
For 2026/27, employer NICs are charged at 15% on earnings above the secondary threshold of £5,000 a year. The Employment Allowance can offset up to £10,500 of employer NICs for eligible businesses, though single-director companies with no other employees usually can't claim it.
The company also deducts the employee's income tax and NICs from wages and pays them over to HMRC, and pays Class 1A NICs at 15% on most taxable benefits in kind, such as company cars.
What about you, the director?
Most director-shareholders take a small salary plus dividends. A common approach is a salary around the NIC threshold, then dividends on top, but the right split depends on your profits, the Employment Allowance and your wider income, so it's worth modelling.
Dividend tax (paid by you, not the company)
Dividends are paid out of post-corporation-tax profit, so the company gets no deduction for them. You then pay dividend tax personally.
For 2026/27:
- The first £500 of dividends is covered by the dividend allowance (tax-free)
- 10.75% on dividends in the basic-rate band (up to £50,270)
- 35.75% in the higher-rate band (£50,270 to £125,140)
- 39.35% above the additional-rate threshold (£125,140)
Your personal allowance of £12,570 still applies first, and it begins to taper away once income exceeds £100,000.
Other taxes a limited company may pay
Depending on what your company does, you might also encounter:
- Business rates, on commercial premises such as offices, shops or warehouses (small business rate relief may apply).
- Capital gains within corporation tax, companies don't pay separate CGT; gains on selling assets are taxed as part of corporation tax.
- Stamp Duty Land Tax (SDLT), if the company buys UK property.
- Plastic Packaging Tax, the Apprenticeship Levy and sector-specific duties, for larger or specialist businesses.
How much tax will my limited company actually pay?
There's no single percentage. A typical small trading company with £40,000 profit pays corporation tax at 19%, that's £7,600, before you take anything out. Add dividend tax and any employer NICs on your salary, and the combined effective rate is what really matters.
That's why most owners look at total tax across the company and the director together, rather than one tax in isolation. For more quick answers, see our FAQ.
For the official rules and current rates, HMRC's guidance on Corporation Tax rates is the authoritative source. For how directors then extract that profit, see our guide on how to pay yourself from a limited company.
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Frequently Asked Questions
What taxes does a limited company pay in the UK?
A UK limited company pays corporation tax on its profits at 19% up to £50,000 and 25% above £250,000 for 2026/27. On top of that it pays VAT once turnover passes £90,000, employer National Insurance at 15% and PAYE if it has staff, and business rates if it occupies commercial premises. The director then pays dividend tax and income tax personally on money taken out.
Do I pay tax twice on limited company profits?
In effect there are two layers, not double taxation on the same income. The company pays corporation tax on its profit first. When you then take that post-tax profit out as dividends, you pay dividend tax personally, but at lower rates (10.75%, 35.75% or 39.35% for 2026/27) and with a £500 dividend allowance, so the dividend rate is set below the equivalent salary tax to reflect the corporation tax already paid.
When does a limited company have to register for VAT?
A company must register for VAT once its taxable turnover passes the £90,000 threshold in any rolling 12-month period, or if it expects to cross it within the next 30 days, per HMRC. You can also register voluntarily below that. The standard VAT rate is 20%, and returns are normally filed quarterly under Making Tax Digital.
How much corporation tax will I pay on £40,000 profit?
A company with £40,000 of profit sits in the small profits band, so it pays corporation tax at 19%, which is £7,600, before the director takes anything out. Dividend tax and any employer NIC on a salary are separate and paid on top, which is why owners look at the combined company-and-director tax rather than one tax alone.
Getting the salary-and-dividend mix right, registering for VAT at the correct time and claiming every allowance you're entitled to can save you thousands a year. Get in touch with Zmartly and we'll walk you through it.
Talk to a Zmartly accountant
Getting the salary-and-dividend mix right, registering for VAT at the correct time and claiming every allowance you're entitled to can save you thousands a year. If you'd like a clear picture of what your company should be paying, and how to pay less, legally, get in touch with Zmartly and we'll walk you through it.
