When you’re running a limited company, you have various responsibilities and obligations, one of which is Corporation Tax. You’ll be required to pay Corporation Tax within the deadline, otherwise, you could endure a fine from HMRC. But knowing how much Corporation Tax you’ll need to pay and how to pay is important. This article will give you the rundown on limited company Corporation Tax, so you’re prepared financially and mentally to carry out your responsibilities.

What is Corporation Tax?

UK-based businesses are required to pay Corporation Tax on their profits from any UK earnings or earnings from abroad. You’re required to pay Corporation Tax if you’re a limited company, a foreign company but with a UK-based office or branch, or a club or unincorporated association such as a sports centre or community group. Corporation Tax bills aren’t sent to you to pay. There are steps that you’re required to take to ensure you’re up-to-date on your payments, which we cover later on in this article.

Corporation tax must be paid on:

• Trading profits - any profits your limited company receives from just carrying out their service or ‘doing business’.
• Investment income profits
• Any chargeable gains from selling business assets for more than their cost.

It was originally introduced after the Second World War as a way of reducing companies' after-tax profits, which would also then reduce the income from profits to company shareholders, in the hopes that UK businesses would retain their profits for investment which was important after WW2.

How much is Corporation Tax for a limited company in 2025/26 and 2026/27?

Corporation Tax rates depend on how much profit your company makes. In recent years the rate ranges from 19% to 25%, depending on your company’s taxable profits.

We’ve provided a breakdown which covers the 2025/26 and 2026/27 tax years:

• From the 1st of April 2023 businesses classed as ‘main rate’ will pay 25% in Corporation Tax.
• Companies with taxable profits below £50,000 will continue to pay 19%.
• If your business profits between £50,000 and £250,000, you’ll instead be able to claim a marginal relief rate, which reduces your rate below the 25% bracket.

For those with more than one limited company, your companies may be considered associate companies. The thresholds of £50,000 and £250,000 are divided by the number of associated companies you have. For example, if you have two associated companies, the threshold of £50,000 and £250,000 will fall to £25,000 and £125,000 respectively. Meaning that you’ll pay 19% on profits below £25,000 and 25% on profits above £125,000 in Corporation tax for either of your two companies.

It was estimated that the higher rate will only affect 10% of UK businesses. Most businesses fall into the marginal relief threshold. You can use the marginal relief calculator on the gov.uk website to work out what your marginal relief will be. Alternatively, read our straightforward guide on how to pay tax, or take a look at the UK tax rates, thresholds, and allowances for some more in-depth insights.

Corporation Tax examples

The easiest way to understand Corporation Tax is to actually look at what it could mean for an actual Limited Company. It also makes it easier for you to know what to expect for your own company.

Example 1: Your company makes £30,000 profit

Imagine you run a small Limited Company and, after deducting allowable business expenses, you have £30,000 of taxable profit. As this is below the £50,000 threshold, the Corporation Tax rate would be 19%.

£30,000 X 19% = £5,700 Corporation Tax 

So in this simplified example, your company would have £24,300 remaining after the Corporation Tax bill was paid. 

Example 2: Your company makes £80,000 profit

Your company has taxable profits of £80,000 after allowable deductions, putting it between the £50,000 and £250,000 thresholds. Now, you don’t simply pay 25% on the whole £80,000. Instead, Marginal Relief applies, reducing the effective Corporation Tax rate.

The exact calculation depends on your company’s circumstances, so you shouldn’t assume that multiplying your profits by 25% will give you your final Corporation Tax bill. 

Example 3: Your company makes £300,000 profit

If your company makes more than £250,000 in taxable profits after all deductions have been applied, then the main Corporation Tax rate is 25%. So, a simplified calculation would be:

£300,000 X 25% = £75,000 Corporation Tax

However, your actual Corporation Tax calculation can be affected by other factors, such as capital allowances, losses and associated companies, so this is only a straightforward illustration.

Corporation Tax is based on profit, not turnover

One important thing to remember is that Corporation Tax isn't simply based on how much money your company receives. For example, your company might invoice customers £100,000 during the year. If you then have £40,000 of allowable business expenses, your taxable profit could be considerably lower than your turnover.

So, if you're looking at your business bank account and thinking, "I've made £100,000 this year, so does that mean I'll pay 25% of £100,000 in Corporation Tax?" - not necessarily.

The calculation starts with your company's profits and then takes account of the relevant tax rules and adjustments.

Do you pay Corporation Tax on a limited company?

Limited Companies based in the UK with offices or branches are required to pay Corporation tax on their trading profits, investment income profits, or chargeable gains from selling assets.

When you set up your limited company you’ll need to register for Corporation tax.

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How to register for corporation tax

When you register a limited company with Companies House, HMRC is automatically notified and creates a Corporation Tax record for your company. However, you must still register for Corporation Tax by telling HMRC when your company starts doing business. You MUST register for Corporation Tax within three months of starting your limited company.

To register for Corporation Tax we’ve broken the process down into easy-to-follow steps:

1. As you should have already registered your business with Companies House, you’ve likely already created a business tax account. Sign into your account to get started. You’ll need your Government Gateway ID and the password associated with this account to access it. You’ll also be asked for your UTR number.
2. You’ll need to tell HMRC your company's registration number, the first date that you started to do business, and the date your annual accounts are made up of.
3. HMRC may send reminders, but it’s down to you to know the Corporation Tax deadline. You’re then required to file a Corporation Tax Return by the deadline. This is required even if you have no Corporation Tax to pay or if you’ve made a loss.

How to pay corporation tax

The deadline to pay your Corporation Tax will depend on taxable profits. For taxable profits of up to £1.5 million, you’re required to pay your Corporation Tax nine months and one day after your accounting period ends. For taxable profits of over £1.5 million, your Corporation Tax must be paid through instalments. You can check the rules for £1.5 million to £20 million on the government website and for over £20 million.

Missing your Corporation Tax deadline can result in paying interest on your bill, however, if you pay yours early, HMRC will pay you interest in line with the Bank of England base rate.

Note: you cannot pay your Corporation Tax by post, all payments must be made electronically or at a bank.

Your options for how you’d like to pay depend on how quickly you want yours completed. For same day or next day, you can pay:

• Online or through telephone banking using faster payments or CHAPS

or

• Through your online bank account

Within three working days:

• Online or through telephone banking by Bacs
• Via direct debit if you’ve previously set one up
• Online using a debit or corporate credit card
• Directly at your bank or building society

Within five working days:

• Via direct debit if you haven’t set one up before

Make sure you plan in advance to avoid missing the deadline, especially around weekends and bank holidays.

What if your company makes a loss?

Not every Limited Company makes a profit every year. For example, you might have started a new business and spent money on equipment, software, professional services and other costs while you're still building up your customer base. Imagine your company brings in £25,000 during its first year but has £40,000 of allowable costs. That leaves you with a £15,000 loss rather than a taxable profit.

You wouldn't pay Corporation Tax on that loss. Depending on the circumstances, you may be able to use the loss against profits from another accounting period or carry it forward to offset against future profits.

There are specific rules around how company losses can be used, so it's worth checking how they apply to your circumstances rather than assuming you can use a loss however you like.

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What if you can’t pay your Corporation tax bill?

If you’re due to pay your Corporation Tax bill but cannot pay it, your first point of call should be to contact HMRC immediately. HMRC may suggest setting up a payment plan or ‘Time to Pay’ arrangement to spread the cost of your tax bill. This is usually only considered if HMRC believes that the instalments would be paid and you’re financially able to keep up with them, if not, you’ll be asked to pay in full.

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Corporation Tax Allowances

Claiming allowable expenses is a great way to reduce your Corporation tax bill.

The most common form of allowance for both sole traders and limited companies are business costs that are required for the running and production of the business. Some examples of this are:

• Materials.
• Equipment.
• Office Supplies.
• Business Insurance.
• Accounting and financial costs.
• Travel and accommodation expenses for business travel.
• Staff costs/wages.
• Business premises costs.
• And much more.

You can claim for anything that is solely for business use and not for personal use, however, if you’re unsure, you can contact an accountant to get clarification if a charge can be claimed as an expense.

Corporation Tax Relief

Just like Corporation Tax allowances, there are particular Corporation Tax Reliefs that can also be claimed that are specific for limited companies or those having to pay Corporation Tax:

• Research & development costs.
• Profit from patents.
• Production of some creative media (e.g. TV, films, theatrical productions, and video games).
• Business losses.
• Investment relief (for certain types of company investments).
• Disincorporation (rare and only applies in specific circumstances).

Making the most of any Corporation Tax Relief can be beneficial as it means you can save on the amount of Corporation Tax you have to pay on your next bill, so you can invest more money into the growth of your business.

Corporation Tax Advice

For any advice on Corporation Tax, what you need to pay, or clarification on allowable expenses or tax relief, get in touch with our Crunch expert Chartered Certified Accountants. Unlimited expert advice is included on all of our paid accounting packages. This means that you'll never have to worry about your bill racking up or a timer running out.