What Is Corporation Tax?

Key facts

Corporation Tax is a tax on the profits of UK limited companies and certain other organisations.
The main rate is 25% (from April 2023). A small profits rate of 19% applies to profits under £50,000.
Companies must calculate and pay their own tax — HMRC does not send a bill.
Corporation Tax is separate from Income Tax, which applies to individuals.

How Corporation Tax Works in the UK

Corporation Tax (CT) is the UK tax charged on the profits of limited companies, as well as some clubs, societies, and other unincorporated associations. It is administered by HMRC and is one of the government’s largest sources of revenue.^[1]

Unlike employees who have Income Tax deducted automatically through PAYE, companies are responsible for calculating their own tax liability, filing a Company Tax Return (CT600), and paying the tax due — all without HMRC sending an invoice.^[4]

What Profits Are Taxed?

Corporation Tax applies to a company’s taxable profits, which include:^[1]

Trading profits — income from the company’s trade or business, minus allowable expenses
Investment income — interest received, rental income, and other non-trading income
Chargeable gains — profits from selling or disposing of company assets (e.g. property, shares)

Taxable profit is not the same as accounting profit. Certain expenses shown in the accounts (such as entertaining clients or depreciation) are “added back” for tax purposes, while capital allowances are deducted instead of depreciation.

Dividends received by one UK company from another are generally not subject to Corporation Tax. They are treated as “franked investment income” and are exempt in most cases.^[1]

Current Corporation Tax Rates

Since 1 April 2023, Corporation Tax rates are:^[2]

Profit Level	Rate	Notes
Up to £50,000	19%	Small profits rate
£50,001 – £250,000	19% – 25%	Marginal relief applies (effective rate tapers upwards)
Over £250,000	25%	Main rate

The £50,000 and £250,000 thresholds are divided by the number of associated companies, so a group with five associated companies would split the lower threshold to £10,000 each.

Corporation Tax vs Income Tax

Corporation Tax and Income Tax are entirely separate taxes. The key differences are:

Feature	Corporation Tax	Income Tax
Who pays?	Companies	Individuals (sole traders, employees, etc.)
Main rate	25%	20% / 40% / 45% (progressive bands)
Tax return	CT600	SA100 (Self Assessment)
Filing deadline	12 months after accounting period end	31 January after tax year end
Payment deadline	9 months and 1 day after period end	31 January (with payments on account)
Personal allowance?	No	Yes (£12,570)

A company director may pay both taxes — the company pays Corporation Tax on its profits, and the director pays Income Tax on any salary or dividends they draw from the company.

How Corporation Tax Is Paid

Corporation Tax must normally be paid within 9 months and 1 day after the end of the company’s accounting period. For example, a company with a year end of 31 March 2026 must pay by 1 January 2027.^[3]

Payment can be made by:

Direct Debit (set up through HMRC’s online services)
Online or telephone banking (Faster Payments, CHAPS, or Bacs)
Corporate credit or debit card (via HMRC)

Larger companies (those with profits over £1.5 million) must pay in quarterly instalments during the accounting period rather than in a single payment after the period ends.^[3]

Frequently Asked Questions

What is Corporation Tax?

Corporation Tax is the UK tax charged on the profits of limited companies and certain other organisations. Companies must calculate and pay the tax themselves — HMRC does not send a bill.

What is the Corporation Tax rate?

Since April 2023, the main rate is 25% for profits over £250,000. A small profits rate of 19% applies to profits up to £50,000, with marginal relief tapering the rate between these thresholds.

What is the difference between Corporation Tax and Income Tax?

Corporation Tax is paid by companies on their profits. Income Tax is paid by individuals (sole traders, employees, etc.) on their personal income. They have different rates, returns, and deadlines.

When must Corporation Tax be paid?

Corporation Tax is normally due 9 months and 1 day after the end of the company’s accounting period. For example, a year ending 31 March 2026 has a payment deadline of 1 January 2027.

Sources

Corporation Tax — GOV.UK
Corporation Tax rates and allowances — GOV.UK
Pay your Corporation Tax bill — GOV.UK
Company Tax Returns — GOV.UK