Corporation Tax Explained for Limited Companies
What is corporation tax, how much do you pay, and when? A clear guide to corporation tax for UK limited companies, including 2026 rates.
Tax is the tax your limited company pays on its taxable profits. It's not optional, it's not self-calculating, and missing the deadlines carries real financial penalties. This guide explains exactly what Corporation Tax is, what rate you'll pay, what you can deduct, and the key deadlines every director must know.
What is Corporation Tax?
Corporation Tax is a tax paid by UK limited companies on their taxable profits. Unlike Income Tax (which is paid by individuals) Corporation Tax is paid by the company itself. The rate depends on how profitable your company is.
Every active limited company must:
Register for Corporation Tax with HMRC within three months of starting to trade
File a Corporation Tax return (CT600) annually
Pay any Corporation Tax owed by the payment deadline
Failing to do any of these things results in penalties and interest charges. HMRC does not send reminders, the obligation is entirely on the director.
Corporation Tax rates for 2026/27
The Corporation Tax rates for the financial year 2026/27 (from 1 April 2026) are:
Annual profit | Rate | Name |
|---|---|---|
Up to £50,000 | 19% | Small profits rate |
£50,001–£250,000 | 19–25% (tapered) | Marginal relief rate |
Over £250,000 | 25% | Main rate |
The tapered "marginal relief" between £50,000 and £250,000 means most smaller companies pay an effective rate somewhere between 19% and 25%, depending on their profits.
What counts as taxable profit?
Your taxable profit is broadly your company's income minus its allowable business expenses. Not all costs are deductible. only those that are "wholly and exclusively" for the purposes of the business.
What you can deduct
Staff salaries (including your own director's salary)
Employer's National Insurance contributions
Office costs (rent, utilities, broadband)
Equipment and technology (subject to capital allowances rules)
Travel and subsistence (business-related only)
Professional fees (accountant, solicitor)
Marketing and advertising
Software subscriptions used for the business
Pension contributions made by the company on behalf of directors or employees
What you cannot deduct
Dividends paid to shareholders (these are paid from after-tax profits)
Personal expenses not related to the business
Client entertainment (specific restrictions apply)
Fines and penalties
Depreciation (use capital allowances instead)
Key Corporation Tax deadlines
Important: Corporation Tax deadlines are based on your accounting period, not the calendar year. Different deadlines apply for payment and filing.
Within 3 months of starting to trade:
Register for Corporation Tax with HMRC via Government Gateway. You'll receive your Unique Taxpayer Reference (UTR) by post within 10 working days.
9 months and 1 day after accounting period end:
Pay any Corporation Tax owed. This is the payment deadline, earlier than the filing deadline.
12 months after accounting period end:
File your Corporation Tax return (CT600) online via HMRC's Government Gateway. Your return must be accompanied by your company accounts (iXBRL format for most companies).
How to register for Corporation Tax
You register for Corporation Tax through HMRC's Government Gateway. You'll need:
Your company registration number (from Companies House)
Your company's start of trading date
Your accounting period dates
Your business address and contact details
Once registered, HMRC will issue a UTR (Unique Taxpayer Reference), a ten-digit number you'll need for all future Corporation Tax correspondence - you. can save this in your FOUNDRS account so its never forgotten
How to file your Corporation Tax return (CT600)
The CT600 is filed online via HMRC's Corporation Tax online service. For most small companies, you'll need:
Your company's profit and loss account
Your balance sheet
A computation showing how taxable profit was calculated
iXBRL-tagged accounts (your accounting software usually handles this)
Most directors use an accountant to prepare and file their CT600. If you're doing it yourself, accounting software like FreeAgent, Xero, or QuickBooks can generate CT600-compatible reports, though the filing itself still requires HMRC-compatible software.
Read more here
When Do Founders Need an Accountant?
Accounting Software vs Hiring an Accountant: Which Do You Need?
What happens if you miss a deadline?
Missed deadline | Penalty |
Return filed up to 3 months late: | £100 flat penalty |
Return filed 3–6 months late: | £200 flat penalty |
Return filed more than 6 months late: | 10% of unpaid tax |
Return filed more than 12 months late: | Additional 10% of unpaid tax |
Tax paid late: | Interest charged from due date |
Can a dormant company avoid Corporation Tax?
If your company is genuinely dormant (has had no significant accounting transactions since incorporation), it may not need to file a CT600. However, you must notify HMRC that the company is dormant, and Companies House still requires an annual Confirmation Statement and dormant company accounts. Don't assume dormancy means no obligations, check with HMRC directly.