If you run a limited company, Corporation Tax is the headline bill on your profits. Here is how the tiered rates, marginal relief and deadlines actually work.
Corporation Tax has a quirk that catches new directors off guard: you have to pay it before you have to file the return that calculates it. The money is due nine months and a day after your year end, but the return itself is not due for a full twelve months. For everyone used to Self Assessment, where filing and paying share a single 31 January deadline, that inversion is the first surprise. It is far from the last.
Corporation Tax is charged on a company's taxable profit, which is broader than just the money it makes from trading. It covers:
Crucially, there is no equivalent of the Personal Allowance. A company pays tax from its very first pound of profit. Allowable business expenses and reliefs, such as capital allowances on equipment, reduce the profit figure, but nothing is automatically tax-free. Corporation Tax is the defining tax of operating as a limited company rather than a sole trader.
Since April 2023, Corporation Tax has been tiered rather than a single flat rate, and that structure continues for 2025/26.
| Profit | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,000 to £250,000 | 25% with marginal relief |
| Over £250,000 | 25% (main rate) |
Marginal relief is what stops a sharp jump at £50,000. Without it, a company earning £50,001 would suddenly be taxed at 25% on everything. Instead, marginal relief tapers the effective rate smoothly upward through the £50,000 to £250,000 band. The result is an effective rate somewhere between 19% and 25% for companies in that range. These thresholds are also divided between "associated companies", so a group of linked companies cannot multiply the £50,000 small-profits limit.
Take a profitable design agency, Brightline Ltd, with £120,000 of taxable profit in its year ending 31 March 2026.
| Step | Amount |
|---|---|
| Taxable profit | £120,000 |
| Charged at main rate 25% | £30,000 |
| Less marginal relief (profit in £50k to £250k band) | approx. -£3,300 |
| Corporation Tax due | approx. £26,700 |
| Effective rate | approx. 22.3% |
Because £120,000 sits inside the marginal relief band, Brightline's effective rate is well below the headline 25%, landing around 22%. The tax must be paid by 1 January 2027 (nine months and a day after the 31 March 2026 year end), even though the CT600 return is not due until 31 March 2027. The Corporation Tax calculator handles the marginal relief maths for any profit figure.
A company must register for Corporation Tax with HMRC within three months of starting to trade, keep accounting records, prepare annual accounts, work out its own tax, and file a Company Tax Return (CT600). The key dates run on an unusual rhythm:
Larger companies, broadly those with profits over £1.5 million, pay by quarterly instalments rather than in a single lump. For most small companies, the once-a-year payment applies. Keeping clean records throughout the year, the discipline at the heart of digital record-keeping, is what makes hitting these deadlines painless; our blog covers practical bookkeeping for company directors.
Corporation Tax has no personal allowance and an inverted timetable, you pay before you file, which is exactly why directors should never leave it to the last minute.
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