Corporation Tax: A beginner’s guide for newly incorporated businesses

What is Corporation Tax?

Corporation Tax is a tax on the taxable profits of companies. This is separate tax from income tax, which employees, sole traders and directors pay on their earned and investment income.

Every company is responsible for calculating its own Corporation Tax liability and submitting a Company Tax Return (CT600) to HMRC.

Who pays Corporation Tax?

Corporation Tax is a tax paid by:

• UK limited companies and
• foreign companies with a UK permanent establishment 

Sole traders and members of partnerships do not pay Corporation Tax; instead they pay Income Tax through self-assessment, or Making Tax Digital for income tax on their profits.

What are the current Corporation Tax rates?

Corporation Tax rates have been frozen since 2023 at 19% for the small profits rate and 25% for the main rate.

The rate your company will pay is based on your company’s annual profits.

Companies’ profits of up to £50,000 are taxed at the small profits rate of 19%, while profits over £250,000 are taxed at the main rate of 25%.

Marginal Relief applies to profits between these thresholds. This gradually increases the effective Corporation Tax rate between the small profits rate and the main rate, so companies do not face a cliff edge increase suddenly from 19% to 25%.

Company annual profit	Corporation Tax rate
Less than £50,000	19%
£50,000 - £250,000	25% reduced by Marginal Relief
Above £250,000	25%

When does my accounting period start?

Your first Corporation Tax accounting period usually begins when your company starts trading. For many businesses, this is shortly after incorporation.

If you ran your business as a sole trade first before incorporating, your accounting period begins on the date of incorporation.

How do I register for Corporation Tax?

When you register your company with Companies House, you will have the option to register for Corporation Tax at the same time. If you do not, you will need to add Corporation Tax services to your business tax account, within three months of starting your business activities. You'll need your company registration number and 10-digit Unique Taxpayer Reference (UTR).

When is Corporation Tax due?

You must pay the Corporation Tax liability within 9 months and 1 day of the end of the company’s accounting period. HMRC offers several ways to pay, including:

• Direct Debit
• Online bank transfer
• Telephone bank transfer
• Corporate debit or credit card
• Personal debit card
• At your bank

If you pay late, HMRC will charge late payment interest and, depending on the circumstances, you may also face penalties.

What is a CT600 and when do I file it?

The CT600 is a Company Tax Return, which must be filed with HMRC within 12 months of the end of your company’s Corporation Tax accounting period.

Remember that the Corporation Tax payment deadline comes before the CT600 filing deadline. Many companies calculate and pay their Corporation Tax based on their company accounts before submitting the CT600. Others choose to file their CT600 at the same time.

The CT600 is filed online. From 1st April 2026, companies must use commercial software to file their CT600 return with HMRC unless you have been granted a reasonable excuse or file your accounts in Welsh.

Filing company accounts

For your first set of Companies House accounts, you normally have 21 months from the date of incorporation to file. However, this extended deadline does not apply to your CT600, which must still be submitted within 12 months of the end of the Corporation Tax accounting period.

It was previously announced that company accounts filing would be software-only from April 2027 but this has been delayed until 1st April 2028. Currently you can file your accounts:

• Via your accounting software
• Through the online portal
• On paper through the post

What counts as taxable profit?

Taxable profit is, in simple terms, the profit your company makes after deducting allowable business expenses from its income. Allowable expenses include salaries, rent, marketing costs and professional fees.

Expenditure on equipment such as computers, machinery and some vehicles is not usually deducted as an ordinary business expense. Instead, tax relief is generally claimed through Capital Allowances, including the Annual Investment Allowance.

Depending on your company's circumstances, taxable profits can also include certain types of investment income and chargeable gains.

Shareholder dividends do not reduce taxable profits, as these are paid from post-tax profits.

How can I reduce my Corporation Tax bill?

There are various allowances and reliefs that can reduce your Corporation Tax liability. These include:

• Claiming all allowable business expenses
• Using the Annual Investment Allowance (AIA) for qualifying capital expenditure
• Making employer pension contributions for the company directors, which are generally an allowable business expense
• Claiming Research and Development (R&D) tax relief, if your company is developing qualifying new products or processes.

How can TaxAssist Accountants help?

Speak to a TaxAssist accountant to identify all the reliefs available to your company. There can be a lot of deadlines and rules to understand, particularly when you have just incorporated your company. TaxAssist can help you understand your company's accounting and tax obligations. We can take care of all your returns and filings for you if you prefer.   

 

Last updated: 15th July 2026