Corporation Tax in the UK: a guide for limited company directors

What Corporation Tax is

Corporation Tax is the tax charged on the taxable profits of a company. It can apply to profits from trading, investments and some disposals. It is different from Income Tax: it is a company tax, and a company does not receive an individual's Personal Allowance.

Most UK limited companies are within the charge to Corporation Tax. A sole trader or ordinary partnership instead pays Income Tax and National Insurance through the individual's tax position.

Current rates and the profit bands

For the 2026/27 financial year, the small-profits rate is 19% and the main rate is 25%. The commonly quoted thresholds are £50,000 and £250,000, with Marginal Relief available between them.

Those thresholds can be reduced by associated companies and shortened accounting periods. The tax calculation must use the facts of the company rather than a headline rate alone.

Payment, accounts and the Company Tax Return

For most companies, Corporation Tax is payable to HMRC nine months and one day after the end of the accounting period. The Company Tax Return (CT600) is normally due to HMRC within 12 months of the end of that period. Larger companies or unusual situations can have different payment rules.

Annual accounts are filed with Companies House on their own timetable. These are related obligations, but tax is paid to HMRC, not to Companies House. Keeping a calendar for your company avoids mixing up the two.

When a company becomes active, it normally needs to tell HMRC within three months of the start of its Corporation Tax accounting period.

Taxable profit and allowable expenditure

Taxable profit can differ from the accounting profit in the accounts. The calculation can include allowable business expenses, capital allowances and reliefs. Common examples of business costs can include staff costs, commercial rent, utilities, professional fees, office supplies, business travel and qualifying software or IT equipment.

Whether a cost is deductible depends on the facts. Keep invoices, receipts, contracts and clear evidence of the business purpose. Personal expenditure, drawings and undocumented transactions should not simply be treated as company costs.

Avoid the common mistakes

• Mixing personal and company money without clear records.
• Missing receipts or failing to reconcile the bank account.
• Assuming every accounting expense has the same tax treatment.
• Leaving the CT600, accounts or payment until the deadline is close.
• Forgetting that dividends, director loans and payroll need their own documentation and treatment.

A practical routine for directors

Update sales, purchases and bank transactions throughout the year. Ask questions while information is current, review the estimated profit before the year end and reserve cash for the company tax bill. A timely review gives you more options than trying to repair records after the deadline.