If you run a limited company, Corporation Tax is the main tax you’ll deal with — it’s charged on your company’s profits. Here’s what it is, how much you pay, when, and how to keep the bill down.
What is Corporation Tax?
Corporation Tax is a tax that limited companies pay on their profits — including trading profits, investment income and chargeable gains. The key difference from being a sole trader is who pays: a company pays Corporation Tax on its profit itself, rather than the owner paying Income Tax on it.
There’s no tax-free allowance for Corporation Tax — it applies from the first pound of profit.
The rates for 2025/26
| Profit | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,000 – £250,000 | Effective rate rising via marginal relief |
| Over £250,000 | 25% (main rate) |
So a small company making under £50,000 profit pays 19%; a larger one over £250,000 pays 25%; and companies in between pay a tapered effective rate thanks to marginal relief. Our free Corporation Tax calculator works out your bill, including marginal relief.
When is it due?
Corporation Tax has an unusual quirk — you pay before you file:
- Payment: due 9 months and 1 day after the end of your accounting period
- Return (CT600): due 12 months after your year-end
So you need to know your profit — and your tax bill — well before the return deadline, which is why preparing your accounts early matters. We cover the filing side in limited company accounts explained.
How it’s calculated
Your Corporation Tax is based on taxable profit, which isn’t quite the same as your accounting profit. To get there:
- Start with your profit
- Add back disallowed costs (like client entertaining and depreciation)
- Deduct capital allowances on equipment and assets
- Apply any reliefs you qualify for
This is where good accounting earns its keep — the difference between a rushed and a careful computation can be real money.
How to reduce your Corporation Tax
Legitimate ways to keep the bill down include:
- Claiming every allowable expense and capital allowance
- Using reliefs such as R&D tax credits if you innovate
- Making employer pension contributions (a deductible cost)
- Extracting profit efficiently through salary and dividends
- Timing significant purchases sensibly
Don’t forget the second layer
A point that catches new directors out: Corporation Tax is only the company’s tax. When you take profit out as dividends, you then pay dividend tax personally. Planning both layers together — not just filing the return — is how you minimise the total.
Get it handled
Corporation Tax rewards careful preparation: claim everything, time things well, and pay no more than you must. Our Accounts & Corporation Tax service prepares your accounts and CT600 with every allowance claimed, and our accountants for limited companies keep your whole tax position efficient year after year.
Frequently asked questions
What is Corporation Tax?
What is the Corporation Tax rate for 2025/26?
When is Corporation Tax due?
How do I reduce my Corporation Tax bill?
Do I pay Corporation Tax and dividend tax?
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Reviewed by Provense Accountants
Written and reviewed by our team of qualified accountants (AAT-regulated). This guide is general information, not personal tax advice — book a free consultation for advice on your situation.