360 Accounts & Bookkeeping Ltd

    Corporation Tax

    Understand how corporation tax works, current rates, allowable expenses, and when to file your CT600 return.

    Last updated: 15 July 2026

    What is Corporation Tax?

    Corporation Tax is the tax your limited company pays on its profits. Unlike personal income tax, which is based on the tax year (April to April), Corporation Tax is calculated based on your company's accounting period, which you set when registering.

    All UK limited companies must register for Corporation Tax with HMRC and submit an annual Company Tax Return (CT600), even if no tax is owed.

    What Are the Current Corporation Tax Rates?

    For the 2025/26 tax year, Corporation Tax rates depend on your company's profits:

    19%

    Small Profits Rate

    Profits up to £50,000

    19-25%

    Marginal Relief

    Profits £50,001 - £250,000

    25%

    Main Rate

    Profits over £250,000

    If your company has associated companies (companies under common control), the profit thresholds are divided between them, potentially pushing you into a higher rate.

    How Are Taxable Profits Calculated?

    Taxable profits are calculated by taking your company's income and deducting allowable business expenses. Key deductible expenses include:

    • Staff costs (salaries, wages, employer's NI)
    • Office costs (rent, utilities, business rates)
    • Travel and subsistence (business travel only)
    • Professional fees (accountants, solicitors)
    • Marketing and advertising
    • Equipment and materials
    • Training relevant to your business

    Non-Deductible Expenses

    Entertainment costs, fines and penalties, personal expenses, and the cost of buying capital equipment (though capital allowances may apply) are not deductible.

    Capital Allowances

    When you purchase equipment, vehicles, or machinery for your business, you cannot deduct the full cost immediately. Instead, you claim capital allowances:

    Annual Investment Allowance (AIA)

    Claim 100% of the cost of qualifying plant and machinery up to £1 million per year. This is the most generous allowance for most small businesses.

    Writing Down Allowance

    For assets not covered by AIA, claim 18% (main rate) or 6% (special rate) of the reducing balance each year.

    When Must You File Your CT600 Return?

    You must file your Company Tax Return (CT600) within 12 months of your accounting period end. This is separate from paying the tax, which has a different deadline.

    CT600 Filing Deadline

    12 months after the end of your accounting period. For a 31 March year-end, file by 31 March the following year.

    Payment Deadline

    9 months and 1 day after the end of your accounting period. For a 31 March year-end, pay by 1 January.

    Late Filing Penalties

    £100 if 1 day late, another £100 if 3 months late, 10% of unpaid tax if 6 months late, plus another 10% if 12 months late. Interest also accrues on late payments.

    Quarterly Instalment Payments

    Larger companies with Corporation Tax liabilities over £10,000 (and profits over £1.5 million) may need to pay in quarterly instalments rather than as a single payment.

    Most small and medium companies are exempt from this requirement and pay their Corporation Tax in a single payment 9 months and 1 day after their year-end.

    Common Questions

    Corporation Tax FAQs

    For the 2025/26 tax year it depends on your profits. The small profits rate of 19% applies to profits up to £50,000, the main rate of 25% applies to profits over £250,000, and marginal relief tapers the rate between 19% and 25% for profits from £50,001 to £250,000. Watch out if you have associated companies (companies under common control): the profit thresholds are divided between them, which can push you into a higher rate.

    Payment is due 9 months and 1 day after the end of your accounting period, so a 31 March year-end means paying by 1 January. This is a different deadline from filing your CT600 return, which is due 12 months after your accounting period ends. Most small and medium companies pay in a single payment; only larger companies with liabilities over £10,000 and profits over £1.5 million may need to pay in quarterly instalments.

    Yes. All UK limited companies must register for Corporation Tax with HMRC and submit an annual Company Tax Return (CT600), even if no tax is owed.

    Taxable profits are your company's income minus allowable business expenses. Key deductible expenses include staff costs (salaries, wages, employer's NI), office costs (rent, utilities, business rates), business travel and subsistence, professional fees, marketing and advertising, equipment and materials, and training relevant to your business. Entertainment costs, fines and penalties, and personal expenses are not deductible, and neither is the cost of buying capital equipment, though capital allowances may apply instead.

    You can't deduct the full cost of equipment, vehicles, or machinery immediately; you claim capital allowances instead. The Annual Investment Allowance (AIA) lets you claim 100% of the cost of qualifying plant and machinery up to £1 million per year, which is the most generous option for most small businesses. For assets not covered by AIA, the writing down allowance gives you 18% (main rate) or 6% (special rate) of the reducing balance each year.

    Penalties stack up quickly: £100 if you're 1 day late, another £100 at 3 months late, 10% of the unpaid tax at 6 months, and another 10% at 12 months. Interest also accrues on late payments.

    Sources

    Rates and thresholds on this page come from the official HMRC and Companies House guidance below. Tax rules change, so check the source if you are relying on a figure.

    Related guides

    Would you rather we handled this for you? See our Limited Company Accounts service, or read the full set of guides.

    Ask us about your situation

    Need help with this?

    Let our expert accountants handle it for you so you can focus on running your business.