Corporation Tax is the tax your limited company pays on its profits. Unlike Income Tax, which you pay personally on your salary and dividends, Corporation Tax is the company's liability — but as a director, you're responsible for ensuring it's calculated correctly, reported on time, and paid when due.
This guide covers the 2025/26 rates, explains how marginal relief works, and walks through the key deadlines every director needs in their calendar.
Corporation Tax Rates in 2025/26
The UK operates a two-tier Corporation Tax system based on your company's taxable profits:
Profit Level | Rate |
|---|---|
£0 – £50,000 | 19% (small profits rate) |
£50,001 – £250,000 | Marginal rate (see below) |
Over £250,000 | 25% (main rate) |
These thresholds and rates are confirmed to remain unchanged for the financial year beginning 1 April 2026.
How Marginal Relief Works
If your company's profits fall between £50,000 and £250,000, you don't simply pay 25% on everything. Instead, marginal relief reduces your effective tax rate on a sliding scale.
The formula is:
Marginal Relief = (Upper Limit – Profits) × Profits / Profits × Fraction
Where the fraction is 3/200 (or 0.015).
In practice, this means your effective tax rate increases gradually from 19% to 25% as profits rise through the marginal band. At £100,000 profit, for example, your effective rate is around 22%.
Associated companies warning: If your company has associated companies (broadly, companies controlled by the same people), the £50,000 and £250,000 thresholds are divided between them. Two associated companies means each has thresholds of £25,000 and £125,000.
Key Deadlines
Corporation Tax has two separate deadlines that many directors confuse:
Payment Deadline: 9 Months and 1 Day After Year-End
Your Corporation Tax bill is due 9 months and 1 day after the end of your company's accounting period. For a company with a 31 March year-end, that means payment is due by 1 January.
Filing Deadline: 12 Months After Year-End
Your Company Tax Return (CT600) must be filed with HMRC within 12 months of the end of your accounting period. For the same 31 March year-end company, that's 31 March the following year.
⚠️ Payment comes before filing: Yes, you have to pay your Corporation Tax before you've technically filed the return that calculates it. In practice, most companies file and pay at the same time — usually well before the payment deadline.
What Counts as Taxable Profit?
Taxable profit isn't simply your accounting profit. You start with your accounts and then make various adjustments:
Add back disallowable expenses — entertaining, some legal costs, depreciation
Deduct capital allowances — which replace depreciation for tax purposes
Deduct any qualifying R&D expenditure relief
Add any other taxable income not in your accounts
The result is your "taxable total profits" — the figure you actually apply the Corporation Tax rates to.
Capital Allowances Update for 2026
From 1 April 2026, the main rate Writing Down Allowance (WDA) is reducing from 18% to 14% for main pool assets. The special rate pool remains at 6%.
However, there's a new First Year Allowance of 40% on qualifying main rate assets purchased from 1 January 2026. This is separate from "full expensing" (100% relief on plant and machinery), which continues to be available.
Directors should review planned equipment purchases with their accountant to optimise the timing of capital expenditure.
How to Pay Corporation Tax
HMRC accepts payment via:
Direct Debit — Set up through your HMRC online account
Bank transfer — Using HMRC's bank details and your 17-character payment reference
BACS/CHAPS — For same-day or next-day payments
Corporate credit card — A fee applies
Note that payment by post and personal credit card are no longer accepted. Allow 3 working days for bank transfers to clear — if your deadline falls on a weekend or bank holiday, payment must reach HMRC by the last working day before.
Penalties for Late Payment and Filing
Late Payment Interest
HMRC charges interest from the day after your payment deadline. The rate is currently base rate plus 2.5%, so around 7.5% as of early 2026. This is charged automatically — no grace period.
Late Filing Penalties
How Late | Penalty |
|---|---|
1 day late | £100 |
3 months late | Another £100 |
6 months late | HMRC estimates your tax bill and charges 10% of that |
12 months late | Another 10% of the estimated tax |
These penalties apply per return. If you're persistently late, penalties for future returns increase.
Common Director Mistakes
Forgetting about the 9-month payment deadline — Many directors focus on the 12-month filing deadline and miss that payment is due earlier.
Not accounting for associated companies — If you control multiple companies, the thresholds are divided. This catches out director-shareholders with several ventures.
Ignoring quarterly instalment payments — "Large" companies (profits over £1.5 million, divided by associated companies) must pay Corporation Tax in quarterly instalments. Miss this and you'll face interest charges.
Confusing accounting profit with taxable profit — Your P&L profit is the starting point, not the answer. Capital allowances, disallowable expenses, and other adjustments make a real difference.
Frequently Asked Questions
Can I pay Corporation Tax early?
Yes, and HMRC will pay you interest at 0.5% on early payments. It's not much, but it's something — and some directors prefer to pay and forget.
What if my company makes a loss?
No Corporation Tax is due, but you should still file a return. Losses can be carried forward against future profits or, in some cases, carried back against previous years' profits for a refund.
Does my accountant file the CT600?
Typically yes. Most accountants handle the Company Tax Return as part of their year-end service. But the legal responsibility remains with the company (and therefore you as director).