Corporation tax and rates

What is Corporation Tax?

Corporation Tax is the tax that limited companies pay on their taxable profits. Taxable profits can include profits from trading and investments, plus any chargeable gains the company makes.

A company’s taxable profits (simply stated) are its income minus allowable business expenses and other deductions.

For UK-resident companies, Corporation Tax generally applies to profits made in the UK and overseas.

You can find more information in the GOV.UK guide to Corporation Tax.

What are the Corporation Tax rates?

There are currently two headline Corporation Tax rates.

For companies with profits of £50,000 or less, the small profits rate of 19% applies.

For companies with profits above £250,000, the main rate of 25% applies.

Companies with profits between £50,000 and £250,000 may qualify for Marginal Relief.

This gradually increases the effective Corporation Tax rate between the 19% small profits rate and the 25% main rate.

If your company has any associated companies, these thresholds will be reduced. For example, if two associated companies share the limits, the thresholds would normally reduce to £25,000 and £125,000 for each company.

Between 1st April 2015 and 31st March 2023, there was a single Corporation Tax rate.

Since a major overhaul of the CT system 1st April 2023, the small profits rate, main rate and Marginal Relief system have applied.

You can check the current Corporation Tax rates and allowances on GOV.UK.

What does a company need to do?

A company has several obligations under Corporation Tax rules. The main points are:

• You must inform HMRC when your company becomes active for Corporation Tax. This is normally within 3 months of starting business activity.
• Corporation Tax is normally due 9 months and 1 day after the end of the company’s accounting period.
• The Company Tax Return is normally due 12 months after the end of the accounting period.
• The deadline for paying Corporation Tax therefore normally falls before the deadline for filing the Company Tax Return.

You can read more about filing and payment deadlines in HMRC’s Company Tax Return guidance.

Your accounting period for Corporation Tax is usually the same 12-month period covered by your annual accounts, although this can be different in the first year of trading.

If you are unsure which costs you can deduct before calculating your company’s Corporation Tax liability, read our complete guide to limited company expenses.

Keeping on top of your Corporation Tax liabilities and calculating your annual tax bill is a core part of Integro Accounting’s fixed fee service.