Last updated: 14 October 2026
What is corporation tax, and what are the rates in the UK?
Corporation tax is the tax UK limited companies pay on their taxable profits, including trading profits, investment income and capital gains. For 2026/27, the main rate is 25% on profits over £250,000. The small profits rate of 19% applies to profits of £50,000 or less, and marginal relief applies between £50,000 and £250,000. Sole traders and partnerships don’t pay corporation tax. They pay income tax instead.
2026/27 rates
| Taxable profits | Rate |
| £0 to £50,000 | 19% (small profits rate) |
| £50,001 to £250,000 | 25% less marginal relief (effective rate about 26.5% on profits in this band) |
| Over £250,000 | 25% (main rate) |
The limits are divided by the number of associated companies and reduced for short accounting periods.
Marginal relief formula
Marginal relief = 3/200 × (£250,000 − taxable profits)
Example
A company has taxable profits of £100,000.
- 25% of £100,000 = £25,000
- Marginal relief = 3/200 × £150,000 = £2,250
- Corporation tax = £22,750 (an effective rate of 22.75%)
What profits are taxed
- Trading profits after allowable expenses and capital allowances
- Interest and investment income
- Chargeable gains on selling assets
- Profits from overseas branches of UK companies, unless an exemption is elected
Most dividends received from other companies are exempt.
Deadlines
| Action | Deadline |
| Register for corporation tax | Within 3 months of starting to trade |
| Pay corporation tax | 9 months and 1 day after the year-end |
| File CT600 | 12 months after the year-end |
| Large companies (profits over £1.5 million) | Quarterly instalment payments |
Reducing corporation tax legally
- Claim all allowable expenses
- Use capital allowances: the £1 million AIA and full expensing
- Make employer pension contributions
- Claim R&D relief for qualifying projects
- Time spending before the year-end
Corporation tax vs income tax
A company’s profit is taxed once at company level. Extracting it as dividends adds personal tax (10.75%, 35.75% or 39.35%). See salary or dividends.
Losses
If a company makes a trading loss, it can carry the loss back 12 months against earlier profits to claim a refund, or carry it forward against future profits. Claims must be made on the CT600.
Common corporation tax mistakes
Companies often forget to tell HMRC that they’ve started trading within 3 months, file their CT600 late or pay late. Late filing penalties start at £100 and increase the longer the return is late. Keep a diary of your deadlines and make sure your accountant has your records in good time.
Overpaid corporation tax
If you have overpaid, HMRC repays the excess with interest, usually after it processes the CT600. You can also ask HMRC to offset the overpayment against another tax liability. Keep the computation that supports the refund, as HMRC may check it. If your profits are close to £50,000, a small change in spending before the year-end can change the rate you pay.
Frequently asked questions
Do dormant companies pay corporation tax?
No, if they have no taxable income.
Is corporation tax paid on turnover?
No, on taxable profit.
What are associated companies?
Companies under common control. They share the £50,000 and £250,000 limits.
How do I pay?
By bank transfer, direct debit or online, using your 17-character reference.
Related: do I have to submit accounts and a CT600 and corporation tax rates.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with corporation tax. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
