If your business is structured as a limited company in the UK, you’re legally required to pay corporation tax on your profits. This tax plays a central role in business finances, and failing to manage it properly can result in hefty penalties.
This article explains what corporation tax is, how it’s calculated, when to pay it, and how professional support can help you stay compliant and efficient.
What Is Corporation Tax?
Corporation tax is a tax on the profits a limited company earns from:
Trading
Investments
Selling assets at a profit (capital gains)
Unlike individuals, companies don’t get a tax-free personal allowance. All taxable profits are subject to corporation tax.
Current Corporation Tax Rate
As of the most recent rules:
Companies with profits under a threshold may pay a lower rate
Companies with higher profits may pay at a main rate or marginal relief rate
Note: Corporation tax rates are set by the government and may change. It’s essential to check current rates or seek professional advice.
Who Pays Corporation Tax?
Any limited company operating in the UK — even if it doesn’t make a profit — must:
Register with HMRC
File corporation tax returns
Pay any tax due by the deadline
Companies that are dormant or not trading may still need to file certain returns.
When and How to Register
You must register for corporation tax within three months of starting to trade. “Trading” includes any business activity like selling, buying, advertising, or employing staff.
Filing and Payment Deadlines
Tax payment due: 9 months and 1 day after the end of your accounting period
Tax return (CT600) due: 12 months after the end of the accounting period
Even if you miss the payment deadline, the return must still be filed.
How Corporation Tax Is Calculated
Your accountant (or tax software) calculates:
Total business income
Allowable business expenses
Capital allowances (for assets like computers, machinery)
Any losses carried forward
The resulting figure is your taxable profit. Corporation tax is then applied to that profit.
Allowable Deductions and Reliefs
You can reduce your corporation tax bill by claiming:
Staff salaries
Office costs and supplies
Marketing expenses
Rent and utility bills
Business insurance
Equipment purchases (via capital allowances)
Research and Development (R&D) relief
Losses carried forward from previous years
Capital Allowances
These allow companies to deduct the cost of certain capital items from taxable profits. For example, if you buy a van for the business, a portion or all of the cost may be claimed through capital allowances.
What Happens If You Don’t Pay or File?
Late or missing corporation tax returns can lead to:
Automatic penalties
Interest on unpaid tax
Additional fines for continued non-compliance
HMRC investigations or audits
Keeping Records for Corporation Tax
You must keep records of:
Sales and income
Expenses and purchases
Invoices and receipts
Bank statements
Payroll and pension costs
Tax computations
These must be stored securely for at least six years.
Using Tax Services to Manage Corporation Tax
Professional tax advisors can:
Calculate and submit your CT600 return
Ensure deductions and allowances are applied correctly
Advise on tax-efficient strategies
Prevent penalties and improve cash flow
Provide forecasts for upcoming tax liabilities
This expertise helps you remain compliant while maximising your business’s financial efficiency.
Conclusion
Corporation tax is a core obligation for UK limited companies — but it doesn’t have to be overwhelming. With the right systems and professional support, you can manage it accurately and strategically. Staying informed and proactive ensures that your company meets its responsibilities and avoids costly surprises.