Corporation Tax is a tax charged on the profits of UK limited companies and certain organisations, including clubs and associations. It is a fundamental compliance requirement for businesses operating through a corporate structure.

What is Corporation Tax?

Corporation Tax is applied to a company’s taxable profits, which broadly include:

  • Trading profits from business activities
  • Investment income such as interest and dividends
  • Chargeable gains on the disposal of assets

UK resident companies are generally taxed on their worldwide profits, while non‑UK companies are taxed on profits arising from UK activities.

Who does it apply to?

Corporation Tax applies to:

  • UK limited companies
  • Foreign companies with a UK presence (e.g. permanent establishment or UK rental property)
  • Some unincorporated associations (e.g. clubs, societies)

It does not apply to sole traders or partnerships — these are subject to Income Tax instead.

Key Dates

  • Corporation Tax is calculated based on a company’s accounting period (usually 12 months).
  • Payment is due 9 months and 1 day after the end of the accounting period.
  • A Corporation Tax return (CT600) must be filed within 12 months of the period end.

For example, a company with an accounting period ended 31 March must pay any Corporation Tax due by 1 January of the following year. The CT600 must be submitted by the following 31 March.

Large companies may be required to pay quarterly by instalments.

Corporation Tax Rates (2026/27)

The UK currently operates a tiered system depending on profit levels:

Profit Level Tax Rate
Up to £50,000 19% (small profits rate)
£50,001 – £250,000 19%–25% (marginal relief applies)
Over £250,000 25% (main rate)
  • The small profits rate remains at 19%.
  • The main rate is 25%.
  • Marginal relief provides a gradual increase between the two thresholds.

Key point: These thresholds are reduced where companies are associated (i.e. under common control).

Tax Planning Considerations

  • Timing of income and expenditure – Accelerating deductible costs or deferring income (where commercially viable) can help manage taxable profits year to year.
  • Capital investment – Reliefs such as the Annual Investment Allowance (AIA) can provide 100% tax relief on qualifying capital expenditure within the tax year.
  • Remuneration strategy – A balanced mix of salary and dividends for owner‑managers can improve overall tax efficiency when considering both Corporation Tax and personal tax.
  • Use of losses – Trading losses can be carried forward or, in some cases, carried back to recover tax already paid — providing valuable cash flow support.
  • Group structuring – Where multiple companies exist, efficient structuring can allow for profit and loss alignment and maximise reliefs, but associated company rules must be monitored.
  • Pension contributions – Employer pension contributions are typically tax deductible from taxable profits and can be an efficient way to extract value.

Cube Partners Tip 💡

If your profits sit within the £50,000–£250,000 band, even modest planning can have a disproportionate impact on your effective tax rate. Regular reviews — not just year‑end planning — are where the real value lies.