If you run a limited company in the UK, understanding Corporation Tax is essential. It’s one of the most significant taxes your business will pay—but many business owners aren't entirely sure how it works or how to reduce their liability legally.
As an experienced accountancy firm working with companies of all sizes, we’ve put together this straightforward guide to Corporation Tax: what it is, how it’s calculated, and what you need to do to stay compliant.
What Is Corporation Tax?
Corporation Tax is the tax your company pays on its taxable profits. This includes:
Profits from trading (sales income minus business expenses)
Investment income (e.g. interest or rental income)
Capital gains (profits from selling assets such as property, equipment, or shares)
Unlike Income Tax, there’s no personal allowance—every penny of profit is taxable.
What Is the Corporation Tax Rate?
As of the 2024/25 tax year, Corporation Tax is based on your company's profits:
19% on profits up to £50,000
25% on profits over £250,000
A tapered rate applies for profits between £50,000 and £250,000
This is known as the "marginal relief system"—it means companies with profits between the two thresholds pay an effective rate somewhere between 19% and 25%.
Example: If your company made £100,000 profit, you wouldn’t just pay 25%—you’d fall within the marginal rate, and your accountant would calculate the exact amount owed using HMRC’s marginal relief formula.
Who Pays Corporation Tax?
You must pay Corporation Tax if your business is:
A limited company (LTD)
A foreign company with a UK branch
A club, society, or association carrying out business activities
Sole traders and partnerships don’t pay Corporation Tax—they’re taxed through Self Assessment instead.
Key Deadlines and Filing Responsibilities
Corporation Tax isn’t paid through a bill like VAT or PAYE. You must:
Register for Corporation Tax with HMRC within 3 months of starting to trade
Keep accurate accounting records and prepare annual accounts
File a Company Tax Return (CT600) with HMRC
Pay any tax owed—usually 9 months and 1 day after the end of your accounting period
For example, if your company’s year-end is 31 March 2025, your Corporation Tax would be due by 1 January 2026.
How to Reduce Your Corporation Tax Bill
There are several legal ways to reduce your Corporation Tax liability. Here are a few common ones
Claim Allowable Business Expenses
Expenses like staff salaries, rent, insurance, software, travel, and office supplies reduce your taxable profit.
Use Capital Allowances
You can claim tax relief on items such as equipment, machinery, and even some renovations.
Make Pension Contributions
Employer pension contributions for directors and employees are deductible for Corporation Tax purposes.
R&D Tax Credits
If your company carries out innovation or technical problem-solving, you may qualify for research and development (R&D) tax relief.
Invest in Training & Development
Training costs to improve your team’s skills can often be written off against profits.
Common Pitfalls to Avoid
Missing filing deadlines, which can result in automatic fines and interest
Failing to register on time after starting to trade
Misunderstanding what counts as taxable profit
Not keeping proper records, which can trigger HMRC investigations
How an Accountant Can Help
Working with an experienced accountant ensures you:
File everything correctly and on time
Avoid unnecessary tax bills
Identify reliefs and allowances you're entitled to
Stay on top of changing rules and thresholds
At Soldi Partners Accounting, we specialise in supporting small and medium-sized businesses across the South East. Whether you’re a start-up, established business, or looking to scale, we make your Corporation Tax process smooth, stress-free, and fully compliant.
We offer a free initial consultation to review your Corporation Tax position and explore ways to reduce your liability.
Get in touch today to speak with one of our friendly, expert accountants.
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