UK Corporation Tax: A Practical Guide for Accountants

Corporation tax is the tax that UK companies pay on their profits. For anyone running a limited company — or training as an accountant — understanding how it works is essential. This practical guide explains what corporation tax is, the current rates, how it's calculated, key deadlines, and the reliefs available — in plain language. It's a core area of UK tax and a foundational topic for ACCA and AAT students. (Tax rates and rules change — always confirm current figures on GOV.UK before relying on them.)

What is corporation tax?

Corporation tax is a tax on the taxable profits of limited companies and some other organisations. Taxable profits include trading profits, investment income and chargeable gains (profits from selling assets). Unlike individuals, companies don't receive a personal allowance — corporation tax is charged on all taxable profit. A key feature of the UK system is that companies are responsible for working out, reporting and paying their own corporation tax under "self-assessment" — HMRC doesn't send a bill; the company must calculate and pay it.

Current corporation tax rates

As confirmed by GOV.UK, the rates for the 2025/26 period are:

• Main rate of 25% — applies to companies with taxable profits over £250,000.
• Small profits rate of 19% — applies to companies with taxable profits of £50,000 or less.
• Marginal relief — companies with profits between £50,000 and £250,000 pay at the main rate but reduced by marginal relief, giving a gradually increasing effective rate between 19% and 25%.

The £50,000 and £250,000 thresholds are reduced where a company has associated companies or a short accounting period, so these need checking in each case.

How corporation tax is calculated

In outline, a company calculates its corporation tax by starting from its accounting profit and making tax adjustments: adding back expenses that aren't tax-deductible (such as client entertaining and depreciation), and instead claiming capital allowances for qualifying capital spending. The result is the taxable profit, to which the appropriate rate is applied. Because of these adjustments, a company's taxable profit usually differs from the profit shown in its accounts.

Registering and paying

A new company must register for corporation tax with HMRC, generally within three months of starting to trade. After that, the cycle each year is: prepare the company accounts, calculate the taxable profit and tax due, pay the tax, and file the Company Tax Return (CT600) along with the accounts. Payment is made electronically to HMRC, and many companies use accounting software or an accountant to handle the calculation and filing.

Key deadlines

Corporation tax has two important and separate deadlines that often catch people out:

• Payment is generally due 9 months and 1 day after the end of the accounting period (larger companies pay in instalments).
• The Company Tax Return (CT600) must be filed within 12 months of the end of the accounting period.

Note that the tax is usually due before the return is filed — a quirk worth remembering. Missing deadlines leads to penalties and interest.

Reliefs and allowances

Companies can reduce their corporation tax bill through various reliefs, including capital allowances on equipment and machinery, research and development (R&D) tax relief for qualifying innovation, and relief for trading losses (which can often be carried back or forward to offset profits in other periods). Using the reliefs a company is entitled to is a legitimate and important part of managing its tax.

Why it matters for finance professionals

Corporation tax is a core part of UK business taxation, and understanding it is essential for accountants, whether preparing company accounts, advising clients, or sitting tax exams. The principles — taxable profit, the rates and thresholds, deadlines, and reliefs — are fundamental and frequently tested. Because the rules and figures change regularly, keeping current with GOV.UK is part of the job.

Frequently asked questions

What is corporation tax?

A tax on the taxable profits of limited companies and some organisations, covering trading profits, investment income and chargeable gains. Companies self-assess, calculate and pay it themselves.

What are the current corporation tax rates?

A main rate of 25% on profits over £250,000, a small profits rate of 19% on profits of £50,000 or less, and marginal relief in between — per GOV.UK for 2025/26. Always confirm current figures.

When is corporation tax due?

Payment is generally due 9 months and 1 day after the accounting period ends, while the Company Tax Return is due within 12 months — so the tax is usually payable before the return is filed.

How can a company reduce its corporation tax?

Through legitimate reliefs such as capital allowances, R&D tax relief, and relief for trading losses carried back or forward — claiming what the company is entitled to.

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