Corporation Tax Explained for Limited Companies
What is corporation tax, how much do you pay, and when? A clear guide to corporation tax for UK limited companies, including 2026 rates.
Corporation Tax is the tax your limited company pays on its taxable profits. It's not optional, it's not self-calculating, and missing the deadlines carries real financial penalties. This guide explains exactly what Corporation Tax is, what rate you'll pay, what you can deduct, and the key deadlines every director must know.
What is Corporation Tax?
Corporation Tax is a tax paid by UK limited companies on their taxable profits. Unlike Income Tax (which is paid by individuals) Corporation Tax is paid by the company itself. The rate depends on how profitable your company is.
Every active limited company must:
Register for Corporation Tax with HMRC within three months of starting to trade
File a Corporation Tax return (CT600) annually
Pay any Corporation Tax owed by the payment deadline
Failing to do any of these things results in penalties and interest charges. HMRC does not send reminders, the obligation is entirely on the director.
Corporation Tax rates for 2026/27
The Corporation Tax rates for the financial year 2026/27 (from 1 April 2026) are:
Annual profit | Rate | Name |
|---|---|---|
Up to £50,000 | 19% | Small profits rate |
£50,001–£250,000 | 19–25% (tapered) | Marginal relief rate |
Over £250,000 | 25% | Main rate |
The tapered "marginal relief" between £50,000 and £250,000 means most smaller companies pay an effective rate somewhere between 19% and 25%, depending on their profits.
What counts as taxable profit?
Your taxable profit is broadly your company's income minus its allowable business expenses. Not all costs are deductible - only those that are "wholly and exclusively" for the purposes of the business.
What you can deduct
Staff salaries (including your own director's salary)
Employer's National Insurance contributions
Office costs (rent, utilities, broadband)
Equipment and technology (subject to capital allowances rules)
Travel and subsistence (business-related only)
Professional fees (accountant, solicitor)
Marketing and advertising
Software subscriptions used for the business
Pension contributions made by the company on behalf of directors or employees
What you cannot deduct
Dividends paid to shareholders (these are paid from after-tax profits)
Personal expenses not related to the business
Client entertainment (specific restrictions apply)
Fines and penalties
Depreciation (use capital allowances instead)
Key Corporation Tax deadlines
Important: Corporation Tax deadlines are based on your accounting period, not the calendar year. Different deadlines apply for payment and filing.
Within 3 months of starting to trade:
Tell HMRC your company has become active and make sure Corporation Tax is added to your business tax account. Your company UTR is normally sent by HMRC after your company is registered. If you haven't received it within 15 working days, you can request it online
9 months and 1 day after accounting period end:
Pay any Corporation Tax owed. This is the payment deadline, earlier than the filing deadline.
12 months after accounting period end:
File your Corporation Tax return (CT600). From 1 April 2026, Company Tax Returns must generally be filed using compatible commercial software. Your return will normally include your company accounts and tax computations in the required digital format.
How to register for Corporation Tax
When you set up a limited company, you may be able to set up Corporation Tax at the same time. If you didn't, you can add Corporation Tax services to your business tax account through Government Gateway once the company starts doing business.
You'll need:
Your company registration number (from Companies House)
Your company's Unique Taxpayer Reference (UTR)
Your company's start of trading date
Your accounting period dates
Your UTR is a ten-digit number HMRC normally sends to your registered office after your company is incorporated. If you haven't received it within 15 working days of registering your company, you can request it online.
You can save your UTR in your FOUNDRS account so it's easy to find when you need it.
How to file your Corporation Tax return (CT600)
From 1 April 2026, you'll need to use compatible commercial software to file your Company Tax Return with HMRC. For most small companies, you'll need:
Your company's profit and loss account
Your balance sheet
A computation showing how taxable profit was calculated
iXBRL-tagged accounts (your accounting software usually handles this)
Most directors use an accountant to prepare and file their CT600. If you're doing it yourself, accounting software like FreeAgent, Xero, or QuickBooks can generate CT600-compatible reports, though the filing itself still requires HMRC-compatible software.
Read more here
When Do Founders Need an Accountant?
Accounting Software vs Hiring an Accountant: Which Do You Need?
What happens if you miss a deadline?
Missed deadline | Penalty |
Return filed up to 3 months late: | £200 flat penalty |
Return filed 3–6 months late: | Another £200 penalty |
Return filed more than 6 months late: | 10% of unpaid Corporation Tax |
Return filed more than 12 months late: | Another 10% of unpaid Corporation Tax |
Tax paid late: | Interest charged from due date |
*if your Company Tax Return is late three times in a row, the £200 penalties increase to £1,000 each
Can a dormant company avoid Corporation Tax?
If your company is genuinely dormant (has had no significant accounting transactions since incorporation), it may not need to file a CT600. However, you must notify HMRC that the company is dormant, and Companies House still requires an annual Confirmation Statement and dormant company accounts. Don't assume dormancy means no obligations, check with HMRC directly.