Corporation tax

How it works

Corporation tax is charged on the profit your company makes in an accounting period, not on the money you personally take out. You work out taxable profit by taking the profit in your statutory accounts and adjusting it: adding back costs tax law does not allow, such as client entertaining and depreciation, and deducting capital allowances on qualifying equipment.

For 2026/27 the rate depends on profit. Profits up to £50,000 are taxed at 19%. Profits above £250,000 are taxed at 25% on the whole amount. Between those two limits the main rate applies and marginal relief reduces the bill, which produces an effective rate on the slice between the limits of around 26.5%. Both limits are divided by the number of associated companies, so a director with three companies under common control gets a third of each limit.

Payment and filing are separate deadlines and this catches out most new directors. Corporation tax is due nine months and one day after the end of the accounting period. The CT600 return and accounts are not due until twelve months after the period end. In other words you pay before you file. Large companies with profits over £1.5m pay by quarterly instalments instead.

Interest runs automatically on tax paid late, and HMRC pays a smaller amount of credit interest if you pay early. Penalties apply to the return rather than the payment: £100 immediately after the filing deadline, another £100 after three months, then percentage-based penalties once the return is six and twelve months late.

Where a rule depends on your circumstances, such as associated companies, losses carried back, or research and development claims, the numbers change materially. Our corporation tax returns service works those through with your figures.

Worked example (2026/27)

Company with £120,000 taxable profit (2026/27)

Marginal relief assumes one company with no associated companies and a 12-month accounting period.

Who this affects

• Contractors trading through a personal service company, where profit after salary is taxed here before dividends are drawn
• E-commerce sellers whose stock and platform fees change the profit figure the tax is charged on
• SaaS founders capitalising development costs, which affects both profit and any R&D claim
• Landlords using a property company, where rental profit is corporation tax rather than income tax
• Any director with more than one company, because associated companies cut the profit limits

Common mistakes

• Treating the filing deadline as the payment deadline and paying three months late
• Forgetting associated companies, so the small profits limit is overstated
• Deducting client entertaining or depreciation, neither of which is allowable
• Leaving no cash aside because the profit was already drawn as dividends

Frequently asked questions

Related terms

Work this out

Related reading

• Uk corporation tax rates

Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 21 October 2026 · Figures for 2026/27 · About our practice

Official sources

• Corporation Tax (GOV.UK)
• Corporation Tax rates and reliefs
• Marginal Relief calculator