Corporation Tax UK: A Complete Guide for Finance Professionals 2026

What Is Corporation Tax?

Corporation tax is charged on the taxable profits of UK limited companies and some other organisations including clubs, societies, and associations. Companies must file a corporation tax return (CT600) with HMRC and pay any tax due within nine months and one day of their accounting period end (for companies with profits under £1.5 million).

Corporation Tax Rates 2026

The main corporation tax rate is 25% for companies with profits over £250,000. The small profits rate is 19% for companies with profits up to £50,000. Companies with profits between £50,000 and £250,000 pay a marginal rate calculated using marginal relief, giving an effective rate between 19% and 25%. These thresholds are divided by the number of associated companies.

Calculating Taxable Profit

Start with accounting profit (profit before tax per the financial statements), then make adjustments: add back disallowable expenses (client entertainment, depreciation, fines), deduct capital allowances (which replace depreciation for tax purposes), adjust for timing differences, and include any other statutory adjustments. The result is taxable profit.

Capital Allowances

Capital allowances replace accounting depreciation in the tax computation. The Annual Investment Allowance (AIA) provides 100% first-year relief on qualifying plant and machinery up to £1 million per year. The main pool uses an 18% writing-down allowance; the special rate pool (long-life assets, integral features) uses 6%. Full expensing (100% first-year allowance on new main pool assets) was made permanent from April 2023.

Research and Development Relief

The merged R&D scheme (from April 2024) provides a 20% above-the-line credit for qualifying R&D expenditure. R&D-intensive loss-making SMEs qualify for enhanced relief under the ERIS scheme. Claims are made via the CT600 with a supporting Additional Information Form (AIF).

Payment Deadlines

Small and medium companies (profits under £1.5 million): pay nine months and one day after year-end. Large companies (profits over £1.5 million): pay via quarterly instalment payments during the accounting period. Very large companies (profits over £20 million): earlier QIP schedule applies.

Further Reading

• ACCA TX Guide
• Small Business Payroll Guide
• R&D Tax Credits Guide

CPD for Tax Professionals

Learnsignal's CPD courses include corporation tax and business tax updates counting as verifiable CPD hours for ACCA, CIMA, and ICAEW members. Explore CPD courses.

FAQ

When did the 25% corporation tax rate take effect?

From 1 April 2023. Before that, the single rate was 19% for all companies.

What is marginal relief?

Marginal relief reduces the corporation tax charge for companies with profits between £50,000 and £250,000, providing a smooth transition between the 19% small profits rate and the 25% main rate rather than a cliff edge.