Understanding Corporation Tax: A Complete Guide for UK Companies

Why Corporation Tax Matters to Your Business

Corporation Tax is one of the most significant financial obligations your UK company will face. Yet many business owners, especially those running their first limited company, are unclear about who pays it, which profits are taxable, what rates apply and when payment is due. Get it wrong, and HMRC can add interest, penalties, or both.

This corporation tax guide from CIGMA Accounting explains the main rules UK companies need to understand. We cover who is liable, how taxable profits are calculated, the applicable Corporation Tax rates and allowances, important filing and payment deadlines, and reliefs that may legitimately reduce your company’s tax liability.

What Is Corporation Tax?

Corporation Tax (CT) is a direct tax charged on the profits of UK-resident companies and certain other organisations.

Unlike VAT or PAYE, HMRC does not normally send your company a Corporation Tax bill. The company is responsible for calculating its liability, filing a CT600 Company Tax Return and paying the correct amount by the relevant deadline.

Key Fact: UK Corporation Tax operates on a self-assessment basis. Responsibility for registering, calculating the company’s taxable profits, filing the return and paying the tax rests with the company.

Who Pays Corporation Tax in the UK?

The Corporation Tax UK rules apply primarily to companies and certain organisations carrying on taxable activities. Entities that may be subject to Corporation Tax include:

• UK-resident limited companies the most common type
• Unincorporated associations, including certain clubs and co-operatives
• Foreign companies with a UK branch or permanent establishment
• Members’ clubs and societies with taxable trading income

Sole traders and ordinary partnerships do not pay Corporation Tax on their business profits. Instead, individuals generally pay Income Tax on their share of profits through Self-Assessment.

If you are still weighing up whether to operate as a limited company or continue as a sole trader, the tax treatment of profits is one of the most important factors to consider. Read our full breakdown on whether you should incorporate your business, covering the financial, legal and tax implications of each structure.

What Profits Are Subject to Corporation Tax?

Corporation Tax applies to a company’s taxable total profits. Depending on the activities of the company, these can include:

• Trading profits – income generated from the company’s core business activities
• Investment income – such as taxable interest, rent and similar receipts
• Chargeable gains – taxable gains arising when the company disposes of certain assets

Dividends received from other UK companies are generally exempt. Your accounting profit is then adjusted for tax purposes. This may involve adding back disallowable expenditure, such as client entertainment, and deducting available capital allowances to arrive at taxable profits.

For a detailed breakdown of this process, see our guide on calculating taxable income for companies.

Corporation Tax Rates and Allowances

Understanding the applicable Corporation Tax rates and allowances is important because the rate a company pays depends on its level of taxable profits and, in some cases, the number of associated companies.

Corporation Tax Rate Summary

• Small Profits Rate: 19% where qualifying profits are £50,000 or less
• Marginal Relief: applies where profits fall between £50,000 and £250,000, producing a gradual increase in the effective Corporation Tax rate
• Main Rate: 25% where profits exceed £250,000

The £50,000 and £250,000 thresholds can be reduced where a company has associated companies. For example, where there is one other associated company, the relevant limits are normally divided between the two companies.

If your business operates across multiple entities, understanding your group company structure is therefore essential when determining the correct Corporation Tax position.

How Is Corporation Tax Calculated for UK Companies in 2026?

Corporation Tax is calculated using a company’s taxable profits rather than simply its turnover or accounting profit. Businesses generally start with their accounting profit, adjust for tax rules, deduct qualifying allowances and reliefs, and apply the relevant Corporation Tax rate.

For the 2026 financial year, the small profits rate is 19% for qualifying profits of £50,000 or less, while the main rate is 25% for profits above £250,000. Companies between these thresholds may qualify for Marginal Relief. The thresholds can be reduced for shorter accounting periods or where associated companies exist.

For example, a company with £40,000 of qualifying taxable profits and no associated companies would generally calculate Corporation Tax of £7,600 at 19%, assuming no special adjustments apply.

When Should a Company Use a Corporation Tax Accountant?

Professional Corporation Tax accounting support can be especially valuable when a business has complex expenses, significant capital purchases, trading losses, multiple companies or uncertainty about available reliefs.

CIGMA Accounting supports UK limited companies with taxable profit calculations, Corporation Tax planning, CT600 preparation and HMRC compliance. Our accountants can review the company’s financial position, identify relevant tax reliefs and help directors understand their payment and filing responsibilities before the applicable deadlines.

CIGMA Accounting can also assist businesses with HMRC Corporation Tax payment queries, checking payment references, reviewing outstanding liabilities and preparing cash-flow information where a payment deadline is approaching. Our London accountants help directors understand what is payable, when it is due and how payment obligations fit alongside CT600 filing and wider company accounts.

Key Corporation Tax Compliance Obligations

Corporation Tax involves more than calculating a percentage of annual profit. Companies must meet several registration, reporting, filing and payment obligations.

Register with HMRC

You generally need to tell HMRC when your company becomes active for Corporation Tax. HMRC uses your company’s Unique Taxpayer Reference (UTR) to identify its Corporation Tax record.

File a CT600 Company Tax Return

Your CT600 Company Tax Return is normally due within 12 months of the end of the relevant accounting period. The return reports taxable profits, relevant allowances and reliefs, and the resulting Corporation Tax liability.

Understanding your full company tax return obligations, including what must be declared and when, is essential for avoiding unnecessary filing problems and penalties.

Pay Corporation Tax

For companies that are not within the quarterly instalment payment regime, Corporation Tax is generally due 9 months and 1 day after the end of the accounting period. This is important because the payment deadline normally falls before the CT600 filing deadline.

Large and very large companies can be subject to different payment rules, including payment by instalments, so companies with substantial taxable profits should confirm the deadlines that apply to their circumstances.

How to Make an HMRC Corporation Tax Payment Online

Companies can make a Corporation Tax payment through HMRC using an approved online payment method. Before paying, check the amount due, the relevant accounting period and the correct payment reference.

HMRC accepts several Corporation Tax payment methods, including:

• Online Banking: Approve a payment through your bank using HMRC’s online payment service

• Bank Transfer: Use Faster Payments, CHAPS or Bacs, allowing enough time for the payment to arrive

• Debit or Corporate Credit Card: Pay online, checking whether a card fee applies

• Direct Debit: Arrange payment through your company’s HMRC online account

For most companies, the Corporation Tax payment deadline is 9 months and 1 day after the end of the accounting period. Payment should be arranged in sufficient time to meet that deadline.

How to Find Your Corporation Tax Payment Reference

Your Corporation Tax payment reference is a 17-character number specific to the accounting period being paid.

You can usually find it:

• On HMRC’s notice to deliver a Company Tax Return

• On relevant Corporation Tax reminders

• In your company’s HMRC online account under the relevant accounting period

Important: Your Corporation Tax payment reference changes between accounting periods. Using an incorrect reference can delay payment allocation or cause HMRC to apply the money to a different tax bill.

After making a payment, check your company’s HMRC online account to confirm that it has been received and allocated correctly.

Reporting Changes to Your Company

Beyond the annual CT600 return, companies have ongoing statutory reporting responsibilities. Changes to company details, structure or trading status may need to be reported to HMRC, Companies House or both.

Review what company changes you must report to ensure you are not missing a compliance obligation outside the annual tax cycle.

Corporation Tax Deadlines: When Must UK Companies Pay and File?

UK companies must meet separate deadlines for paying Corporation Tax and filing their CT600 Company Tax Return. For most companies, Corporation Tax is payable 9 months and 1 day after the accounting period ends, while the CT600 filing deadline is 12 months after that period ends.

Companies with an accounting period ending on 31 October generally have until 31 October to file their CT600 return. Meanwhile, companies with an accounting period ending on 31 January generally have a Corporation Tax payment deadline of 1 November.

These dates do not apply to every business. The deadline depends on the company’s accounting period, and companies subject to instalment payment rules may have earlier payment obligations.

What Should Companies Check Before Their Corporation Tax Deadline?

• Confirm the Corporation Tax accounting period and applicable deadline

• Reconcile accounting records and calculate taxable profits

• Review allowable business expenses, capital allowances and tax reliefs

• Check whether Marginal Relief or associated-company rules affect the calculation

• Prepare the CT600 return and arrange payment using the correct HMRC reference

Companies approaching their deadline should review their Corporation Tax position early enough to correct errors and allow payments to reach HMRC on time.

What Happens If You Miss the Corporation Tax Deadline in 2026?

Missing a Corporation Tax deadline can increase a company’s costs. HMRC charges late payment interest on outstanding Corporation Tax, while failing to submit a CT600 return on time can trigger separate filing penalties.

For Company Tax Returns with filing deadlines on or after 1 April 2026, the standard late filing penalties are:

• £200 if the return is late

• A further £200 if the return remains outstanding after three months

• Additional tax-related penalties may apply after six and twelve months

• Higher fixed penalties may apply where returns are repeatedly filed late

These penalties are separate from interest charged on late Corporation Tax payments. Companies should also remember that a CT600 return may still be required even where the business has made a loss or has no Corporation Tax to pay.

If your filing or payment deadline has already passed, review the outstanding liability, submit the required return and arrange payment as soon as possible.

Can You Delay Your Corporation Tax Payment?

If your company cannot pay its Corporation Tax bill by the deadline, contact HMRC as soon as possible. Depending on your company’s circumstances, HMRC may agree to a Time to Pay arrangement that allows the outstanding tax to be paid in instalments.

A Corporation Tax payment plan is not automatically available, and requesting one does not guarantee approval. HMRC will consider the company’s financial position and ability to make payments.

What Should You Do if You Cannot Pay Corporation Tax?

• Calculate the Amount Owed: Confirm the Corporation Tax liability and any payments already made

• Review Cash Flow: Work out what the company can realistically afford to pay

• Contact HMRC: Explain the difficulty and discuss whether a payment arrangement is possible

• Keep Filing Obligations Up to Date: A payment arrangement does not remove the requirement to submit a Company Tax Return

• Monitor Interest: Late-payment interest may continue to apply to outstanding Corporation Tax

Businesses facing payment difficulties should also review their accounting records, expected income and upcoming tax obligations. A Corporation Tax accountant can help assess the position and prepare the financial information needed for discussions with HMRC.

Corporation Tax Allowances and Reliefs That Can Reduce Your Bill

The amount of UK Corporation Tax payable does not depend solely on accounting profit. Companies may be able to use allowances, deductions and tax reliefs where the relevant qualifying conditions are satisfied.

• Annual Investment Allowance (AIA) – a 100% deduction for qualifying expenditure on plant and machinery, subject to the applicable annual limit
• Capital allowances – tax relief may be available for qualifying capital expenditure that cannot be deducted as an ordinary business expense
• R&D tax relief – qualifying companies carrying out eligible research and development activities may be able to claim relief under the applicable R&D regime
• Marginal Relief – reduces the effective Corporation Tax burden for qualifying companies with profits between the relevant lower and upper limits
• Loss Relief – qualifying trading losses may be available to offset against profits. See how claiming Corporation Tax losses works and what conditions apply
• Patent Box – qualifying companies may elect for a reduced 10% Corporation Tax rate to apply to qualifying profits from patented inventions and certain other intellectual property rights

Knowing which reliefs apply to your business is only the starting point. Explore our guide on tax planning strategies for companies to understand how available reliefs can form part of a proactive, year-round approach.

Common Corporation Tax Mistakes to Avoid

• Missing the Corporation Tax payment deadline because it is confused with the CT600 filing deadline
• Failing to notify HMRC when the company becomes active
• Calculating taxable profit directly from accounting profit without making the necessary tax adjustments
• Failing to claim available expenses, reliefs and capital allowances
• Ignoring the impact of associated companies on the Corporation Tax thresholds
• Failing to consider whether qualifying business investment or innovation could attract tax relief

Good Corporation Tax management therefore requires accurate accounts, appropriate tax adjustments, awareness of available reliefs and careful attention to both filing and payment deadlines.

Case Study: Reviewing Corporation Tax as Company Profits Increased

A growing consultancy approached our Wimbledon office after a particularly successful trading year. The directors expected taxable profits of approximately £180,000 and initially assumed that the company would simply pay the 25% Corporation Tax main rate on the entire amount.

Cigma Accounting reviewed the company’s draft accounts and tax computations before the CT600 was prepared. Because profits fell between the £50,000 and £250,000 thresholds, we established whether Marginal Relief applied rather than automatically calculating Corporation Tax at a flat 25%.

The directors also had interests in another company, so we reviewed whether the businesses were associated companies for Corporation Tax purposes. This was important because associated companies can reduce the profit thresholds used when determining entitlement to the small profits rate and Marginal Relief.

We then reviewed the accounting profit for the necessary tax adjustments. This included identifying expenditure requiring an add-back, considering available capital allowances on qualifying equipment purchases and reviewing whether trading losses or other legitimate Corporation Tax reliefs were available. We also distinguished the Corporation Tax payment deadline from the later CT600 filing deadline so sufficient cash could be reserved for the liability.

Our wider support covered the company’s annual accounts, bookkeeping, VAT, payroll and business tax planning. This gave the directors greater visibility over their tax position during the year instead of discovering the final Corporation Tax liability shortly before payment was due.

The company was left with a properly supported Corporation Tax calculation, a clearer understanding of how increasing profits affected its effective tax rate and a more structured process for managing future tax liabilities and reliefs.