Corporation Tax UK 2025/26 — Rates, Small Profits Rate & How to Pay

Corporation Tax UK 2025/26 — Rates, Small Profits Rate & How to Pay

If you run a limited company in the UK, Corporation Tax is the tax on your company’s profits. This guide explains the 2025/26 rates, the small profits rate, marginal relief, the deadlines, and how to file and pay — in plain English.

What is Corporation Tax?

Corporation Tax is charged on the taxable profits of UK limited companies and some other organisations. It is separate from the personal tax you pay as a director on your salary or dividends.

Your company’s taxable profit is not the same as its accounting profit. You start with the profit in your accounts, then add back disallowable expenses (like client entertainment) and deduct capital allowances on equipment.

The 2025/26 Corporation Tax rates

The two-tier system has applied since April 2023 and is unchanged for 2025/26.

Worked examples (one company, 12-month period, no associated companies):

• £30,000 profit: £30,000 × 19% = £5,700
• £50,000 profit: £50,000 × 19% = £9,500
• £100,000 profit: tax at 25% less marginal relief = £22,750 (effective rate 22.75%)
• £250,000 profit: £62,500 (25%)

Marginal relief — the 26.5% quirk

Profits between £50,000 and £250,000 are charged at the 25% main rate, then reduced by marginal relief calculated with the standard fraction of 3/200.

The practical effect: each extra pound of profit in that band is effectively taxed at 26.5% — higher than the 25% main rate above £250,000. That is because the relief is withdrawn as profits rise.

If your company has associated companies (other companies under common control), the £50,000 and £250,000 limits are divided between them. If your accounting period is shorter than 12 months, the limits are reduced proportionately.

Close investment-holding companies pay 25% on all profits, with no small profits rate or marginal relief.

What counts as taxable profit?

Start with your accounting profit, then:

• Add back expenses that are not allowable for Corporation Tax, such as client entertainment and fines.
• Deduct capital allowances on qualifying equipment — the Annual Investment Allowance is £1 million, so most small companies can deduct the full cost in the year of purchase.
• Deduct allowable losses brought forward from earlier years, if you have them.

Deadlines — two different dates

This catches many new directors out: the payment deadline and the filing deadline are different.

• Pay Corporation Tax: 9 months and 1 day after the end of your accounting period. For a period ending 31 December 2025, the tax is due 1 October 2026.
• File your Company Tax Return (CT600): 12 months after the end of your accounting period. For a period ending 31 December 2025, the return is due 31 December 2026.

You must also file accounts with Companies House, usually 9 months after your year end — a different deadline again, with its own penalties.

Large companies pay Corporation Tax in instalments. Most small companies pay in one payment by the 9 months and 1 day deadline.

How to file and pay

• File your Company Tax Return (CT600) with HMRC using company tax software — HMRC’s own free filing service for companies closed on 31 March 2026, so you now need commercial software or an accountant.
• Pay by bank transfer, Direct Debit, debit card or through your HMRC online account. Use your company’s 10-digit Unique Taxpayer Reference (UTR) as the payment reference.
• Making Tax Digital for Corporation Tax is not yet in force — you do not need MTD software for Corporation Tax yet, unlike MTD for Income Tax and MTD for VAT.

What happens if you are late?

• Late payment: interest runs from the day after the payment deadline until you pay.
• Late filing: penalties start at £100 for a return up to 3 months late, rising to £200, then 10% of the tax due for longer delays. Repeated late filing increases the penalties.
• Late Companies House accounts: separate penalties from £150, rising with delay.

File and pay on time even if you cannot pay in full — contact HMRC about a payment plan rather than ignoring the deadline.

How to reduce your Corporation Tax bill (legally)

• Claim every allowable expense — and claim it in the right year.
• Use capital allowances, including the £1 million Annual Investment Allowance, on equipment.
• Claim R&D tax relief if your company does qualifying research and development.
• Pay directors a salary up to the Personal Allowance and the National Insurance thresholds, where that suits your overall tax position — and check the dividend position too, since salary and dividends are taxed differently.
• Keep good records from day one, so nothing is missed at year end.

What to check now

• Know your accounting period end date — your deadlines run from that, not the tax year.
• Put the payment date (9 months and 1 day) in your calendar now.
• Check whether your profits are near the £50,000 or £250,000 limits — the rate changes there.
• If you have associated companies, check whether the limits are shared.

Frequently asked questions

What is the Corporation Tax rate in 2025/26?
19% on profits up to £50,000, 25% over £250,000, with marginal relief in between.

When is Corporation Tax due?
9 months and 1 day after your accounting period ends. The Company Tax Return is due 12 months after the period ends.

What is the small profits rate?
19% Corporation Tax on taxable profits of £50,000 or less, for companies that are not close investment-holding companies.

Do I need MTD software for Corporation Tax?
Not yet. Making Tax Digital for Corporation Tax is not in force, unlike MTD for Income Tax and MTD for VAT.

Can I pay Corporation Tax in instalments?
Most small companies pay in one payment. Large companies must pay in instalments.

This article gives general information about UK tax, not personal financial or tax advice. Tax rules can change, and your situation may be different. Check GOV.UK or speak to a qualified accountant before you act.