What is Corporation Tax?
Corporation Tax is a tax paid by UK limited companies on their annual profits. Profit is calculated as your total revenue minus any allowable business expenses. It is administered by His Majesty's Revenue and Customs (HMRC).
Every UK limited company must file a Company Tax Return (Form CT600), regardless of whether it made a profit or a loss.
Corporation Tax Rates
As of April 2023, the Corporation Tax rates are as follows:
- The **main rate** of Corporation Tax is **25%** for companies with profits over £250,000.
- The **small profits rate** is **19%** for companies with profits of £50,000 or less.
- Companies with profits between £50,000 and £250,000 pay tax at the main rate but can claim Marginal Relief, which provides a gradual increase in the effective tax rate.
For most startups in their early years, the 19% rate will likely apply.
Filing Deadlines
Corporation Tax involves two key deadlines, and they are different.
- Deadline to Pay: Your Corporation Tax bill must be paid **9 months and 1 day** after the end of your company's accounting period.
- Deadline to File: Your Company Tax Return (CT600) must be filed **12 months** after the end of your accounting period.
It's crucial to note that you must pay your tax *before* you file your return. Late payment incurs interest, and late filing incurs penalties.
Final Thoughts
Corporation Tax is a core compliance responsibility for every UK company. Maintaining clean bookkeeping throughout the year is the best way to ensure you can calculate your profits accurately, claim all allowable expenses, and file on time to avoid penalties.