Corporation tax is charged on the profits of all UK-based companies, such as limited companies and foreign companies with offices or branches in Britain.
It is also levied on organisations such as co-operatives, clubs and unincorporated organisations like sports clubs.
Corporation tax (CT) is charged on your limited company’s profits. In practice, that’s any money made from the day-to-day costs of doing business (known as “trading profits”), as well as any investments owned by your business.
The tax is also levied on any assets which are sold for an amount more than they cost, which is known as “chargeable gains”.
How does it apply to limited companies?
Corporation Tax rates increased from April 2023.
| Annual Profits | 2023/24 & 2024/25 | 2022/23 |
|---|---|---|
| up to £50,000 | 19% | 19% |
| £50,001 - £250,000 | 26.5% | 19% |
| over £250,000 | 25% | 19% |
The current 19% rate remains for profits of £50,000 or less, with the full 25% main rate kicking in after profits reach £250,000.
Between these thresholds, a system or marginal relief will apply – an effective rate of 26.5%.
How do you register to pay it?
You have to register your company to pay Corporation Tax within three months of starting to carry out any business.
The definition of “starting to do business” can include a wide range of activities, including advertising, buying and selling, and even renting a property.
It’s a good idea to take action as soon as you can, as you could face a fine or a penalty if you don’t register your new company for corporation tax in time.
Following incorporation, HMRC will automatically send you a Corporation Tax registration form (CT41G), and a Unique Taxpayer Reference (UTR) to your company’s registered address.
You will need your company’s UTR, registration number (on your Companies House paperwork), the date you started trading, and the date your annual accounts are made up.
The vast majority of limited companies hire qualified accountants to take care of this type of paperwork. Unless you have some kind of accountancy training, we would advise you to use an accountant to help you set up your tax affairs. They will be able to register your company for all the other key taxes – including VAT, and your payroll.
When is it due?
The CT600 Corporation Tax Return (which outlines how much profit your company has made during the tax year) must be filed within 12 months of your limited company’s accounting period.
Confusingly, though, any tax owed must be paid earlier—within nine months and one day of the end of your accounting period.
If your profits are above £1.5m (unlikely for most of our readers), you’ll be required to pay your CT bill in installments.
You can pay your CT liabilities in several ways, including telephone or online banking, Bacs, or direct debit.
You can also pay online via debit or credit card or at a local branch of the Post Office or your local building society or bank.
For further information, try the Government’s guides to Corporation Tax.
Tax-efficient protection for directors
- Life Insurance - pay via your limited company - save up to 50%
- Income Protection - tax deductible via your ltd company
- Professional Indemnity insurance - from £13.50/month via Qdos
