Financial year 2026 (1 April 2026 to 31 March 2027)
This page sets out how Corporation Tax works for a single trading company: how taxable profits are arrived at, the rates and Marginal Relief, when the profit limits are reduced, and paying and filing. Larger companies and groups face further, more complicated rules, which are not covered here.
Corporation Tax is the tax a limited company pays on its profits. Unlike Income Tax, there is no tax-free allowance: tax is due on the company’s taxable profits for each accounting period, usually the period covered by its annual accounts.
Taxable profits are made up of the company’s adjusted trading profits, plus any other income such as interest or rent, plus gains on selling assets such as property or investments.
The profit shown in a company’s accounts is the starting point, not the figure that is taxed. It is adjusted for tax: some costs are added back because they are not allowed (for example, depreciation and client entertaining), and capital allowances are deducted instead for spending on equipment, vans and similar assets. The result is the adjusted trading profit. These rules, which apply to sole traders and companies alike, will be covered on a separate Business Profits page.
This is not a full set of rates and rules. For anything not shown here, see HMRC’s guidance on Corporation Tax.
Financial year 2026 (1 April 2026 to 31 March 2027)
The rate depends on the size of the company’s taxable profits. Smaller profits are taxed at the small profits rate, larger profits at the main rate, and in between, Marginal Relief reduces the bill so that the rate rises gradually rather than in one jump.
For a twelve-month accounting period, and a company with no associated companies:
| Small profits rate: profits up to £50,000 | 19% |
| Marginal Relief: profits from £50,001 to £250,000 | between 19% and 25% |
| Main rate: profits over £250,000 | 25% |
Between £50,000 and £250,000, tax is worked out at 25% and then reduced by Marginal Relief, calculated as 3/200 of the difference between £250,000 and the profits. The effect is that each extra £1 of profit in this range is taxed at 26.5%, although the average rate on all the profits stays between 19% and 25%.
Example: on taxable profits of £100,000, tax at 25% is £25,000. Marginal Relief is 3/200 of £150,000, which is £2,250. The bill is therefore £22,750, an average rate of 22.75%.
HMRC has a Marginal Relief calculator that does this for you.
This is not a full set of rates and rules. For anything not shown here, see HMRC’s Corporation Tax rates guidance.
Financial year 2026 (1 April 2026 to 31 March 2027)
The £50,000 and £250,000 limits are not fixed for every company. They are reduced in two common situations, which can mean a company pays more tax than its profits alone would suggest.
If a company is associated with other companies, broadly because they are under the same control, the limits are divided between them. The rules on who counts as being in control can extend beyond the shareholders themselves, so this is worth checking where an owner has, or is connected with, more than one company. Companies that do not carry on any trade or business during the period are ignored.
Example: a company with three associated companies divides the limits by four, so its small profits limit becomes £12,500 and its upper limit £62,500.
If an accounting period is shorter than twelve months, for example in the first year or after changing the year end, the limits are reduced in proportion. For a six-month period, they become £25,000 and £125,000.
A close company that mainly holds investments, rather than trading or letting property to unconnected tenants, is usually a close investment-holding company. It pays the main rate of 25% whatever its profits, and cannot use the small profits rate or Marginal Relief.
This is not a full set of rates and rules. For anything not shown here, see HMRC’s guidance on Marginal Relief.
Financial year 2026 (1 April 2026 to 31 March 2027)
HMRC does not send a Corporation Tax bill. The company works out its own tax, pays it, and files a Company Tax Return (form CT600) to show how it was calculated. This is separate from filing the annual accounts at Companies House.
Counted from the end of each accounting period, for companies with taxable profits up to £1.5 million:
| Pay the Corporation Tax | 9 months and 1 day after |
| File the Company Tax Return | 12 months after |
| File accounts at Companies House (private companies, after the first year) | 9 months after |
A return must be filed even if the company made a loss or has no tax to pay. Late filing brings an automatic £200 penalty, a further £200 at three months, and tax-based penalties after that; late payment brings interest. Companies with profits over £1.5 million pay in instalments, which is beyond the scope of this page: see HMRC’s guidance on paying Corporation Tax.
A new company is normally set up for Corporation Tax when it is registered at Companies House. If not, it needs to be added to the company’s HMRC business tax account once it starts to do business. A company that has not yet started trading may be treated as dormant.
This is not a full set of rates and rules. For anything not shown here, see HMRC’s guidance on Company Tax Returns.
Financial year 2026 (1 April 2026 to 31 March 2027)
A few points catch companies out, usually where company money and personal money meet.
If a director who is also a shareholder takes money from the company that is not salary, dividends or repayment of expenses, it is a loan. If it is still owed nine months after the end of the accounting period, the company pays extra Corporation Tax on the amount outstanding: 35.75% for loans made from 6 April 2026, and 33.75% for earlier loans. This tax is repaid once the loan is repaid, but there can be further personal tax and National Insurance on loans over £10,000 and on loans written off. See HMRC’s guidance on directors’ loans, or speak to your adviser before relying on a loan account.
As explained on the Rates tab, profits between £50,000 and £250,000 are taxed at an effective 26.5% at the margin. Timing of spending, pension contributions for directors and other choices can matter more within this band than outside it.
Corporation Tax is only the company’s side. When profits are paid out to the owners as salary or dividends, Income Tax and in some cases National Insurance are due personally. The overall position is best looked at as a whole: see the Income Tax page for the personal rates.
This is not a full set of rates and rules. For anything not shown here, see HMRC’s guidance on directors’ loans.