What is Corporation Tax?
Corporation Tax is the tax a UK limited company pays on its taxable profits. It's worked out for each accounting period, which is usually the company's financial year. Taxable profit is broadly your profit from the accounts, adjusted for things HMRC treats differently, such as entertaining costs and capital allowances instead of depreciation.
A new company must register for Corporation Tax within three months of starting to trade.
Corporation Tax rates
| Taxable profits | Rate |
|---|---|
| £50,000 or less | 19% (small profits rate) |
| £50,001 to £250,000 | 25%, reduced by marginal relief |
| Over £250,000 | 25% (main rate) |
The £50,000 and £250,000 limits are shared between associated companies (companies under common control). They're also reduced if your accounting period is shorter than 12 months.
Marginal relief, with an example
If profits fall between £50,000 and £250,000, tax is first worked out at 25%, then reduced by marginal relief. The standard formula is:
Marginal relief = (£250,000 − taxable profits) × 3/200
Example
Bright Studio Ltd has taxable profits of £72,400 for the year to 31 March 2026, and no associated companies.
| Tax at 25% (£72,400 × 25%) | £18,100.00 |
| Marginal relief ((£250,000 − £72,400) × 3/200) | −£2,664.00 |
| Corporation Tax to pay | £15,436.00 |
|---|
That's an effective rate of about 21.3%.
Payment and CT600 deadlines
Corporation Tax has two separate deadlines, and the payment comes first:
| What | When | Year ending 31 March 2026 |
|---|---|---|
| Pay Corporation Tax | 9 months and 1 day after the end of the accounting period | 1 January 2027 |
| File the CT600 return | 12 months after the end of the accounting period | 31 March 2027 |
Larger companies (profits over £1.5 million) pay in quarterly instalments instead. Most small companies don't need to worry about this.
Your company accounts must also be filed with Companies House. For a private company that's usually 9 months after the end of the financial year.
Late filing penalties
| How late is the CT600? | Penalty |
|---|---|
| 1 day | £100 |
| 3 months | Another £100 |
| 6 months | HMRC estimates the tax and adds 10% of the unpaid tax |
| 12 months | Another 10% of any unpaid tax |
If a return is late three times in a row, the £100 penalties increase to £500 each. Interest is also charged on tax paid late.
How Munshian Ledger helps
Munshian Ledger works out your company's CT600-ready Corporation Tax figures from your books, including marginal relief and associated companies, shows your payment and filing dates and books the tax in your accounts. You or your accountant then file the CT600 with HMRC.
This guide is general information, correct as we understand it at the date shown. It isn't tax advice for your situation. For the latest rates and rules see GOV.UK, or speak to an accountant.