All you need to know about Corporation Tax in the UK

Corporation Tax is a key part of the UK business landscape and affects limited companies of all sizes and certain other organisations like clubs, societies, and associations. Unlike other taxes, Corporation Tax is charged on the profits a company earns over its financial year. As tax regulations continue to evolve, staying informed helps businesses avoid costly mistakes.

With recent changes to rates and regulations, it has become more important than ever for business owners to stay up to date. From April 2026, filing to Companies House and HMRC via a combined portal will be restricted. Therefore, it is advisable to use a secure accounting platform to submit your returns. This change follows the closure of the joint online filing service between Companies House and HMRC, which will end on 31 March 2026. The service is being discontinued because it is outdated and no longer aligns with modern digital standards.

This guide walks you through what Corporation Tax is, who it applies to, and how to calculate and pay it accurately and on time.

What is Corporation Tax?

Corporation Tax is the tax your company pays to HMRC and is entirely dependent on the profit your business makes during the accounting period. All UK limited companies are required to pay Corporation Tax, contributing to public services through their business profits. Unlike sole traders or partnerships, who pay income tax, your company pays Corporation Tax because it is legally separate from you, and its finances are separate from your personal ones.

How to calculate taxable profit

The formula to calculate the taxable profit of a business is:

Taxable profit = Turnover (Total sales revenue from goods/services) - Allowable Expenses (Costs that are exclusive for business use)

Examples of allowable expenses include:

• Staff salaries and benefits

• Rent and utilities

• Professional fees

• Insurance

• Equipment and machinery

What needs to be submitted to HMRC for filing?

A complete Company Tax return must be submitted in order to file Corporation Tax with HMRC. This needs to be filed along with accounts and computations in iXBRL (Inline eXtensible Business Reporting Language) format. It is made up of two components, as outlined below.

1. Corporation tax computations and CT600 (with supplementary forms)

The Corporation Tax return (CT600) is the document you submit to HMRC detailing your company’s income, expenses, profits, and the tax owed.

Supplementary forms may be required with the CT600 to address specific circumstances that are not covered in the standard return. You can find more details in the official HMRC website.

2. Full final accounts 

A company’s annual statutory accounts must be prepared at the end of its financial year. These accounts are submitted to HMRC in iXBRL format as part of the Company Tax return.

Who pays Corporation Tax?

Corporation Tax is required for all limited companies and also applies if you make a profit from doing business as a:

• Resident and non-resident companies (pay only on the profit arising from the UK branch/office).

• Club, co-operative, or other unincorporated association (for example, a community group or social club).

You pay Corporation Tax on the profits your company or association makes from:

• Business activities

• Investments

• Selling assets for more than their purchase price

If your company is dormant for Corporation Tax, it is considered dormant under one of the following conditions:

• It has stopped trading and has no other income.

• It is a new limited company that has not started trading yet.

• It is a flat management company.

• It is an unincorporated association or club owing less than £100 in Corporation Tax.

How do the Corporation Tax rates work?

Corporation Tax rates change over the years. Here's where they stand at the end of 2025:

• If your business profit is £50,000 or less, you pay the small profits UK tax rate, which is 19%.

• If your business profit is £250,000 or more, you pay the main rate of UK tax, which is 25%.

• If your business profit falls between £50,000 and £250,000, you are entitled to marginal relief from HMRC. This is a gradual increase in the tax rate depending on your profit. You can find out how much it will be by using the marginal relief tax calculator on the government website. (Note: These thresholds will change based on associated companies.)

• If you do not qualify for marginal relief, you must pay the main Corporation Tax rate of 25%.

• If you do qualify for marginal relief, your tax rate gradually increases between 19% and 25%, depending on your profit.

Note: You don't receive any bills for your Corporation Tax. You need to maintain accurate records, file a company tax return (CT600), and pay the correct amount.

What are the deadlines for paying Corporation Tax?

Keep in mind that the payment deadline comes before the filing due date of your tax return. Make sure to pay on time to avoid penalties.

• The filing deadline is 12 months after the end of your business accounting period.

• The payment deadline is 9 months and 1 day after the end of your business accounting period.

If your payment deadline falls on a weekend or public holiday, your payment must reach HMRC before the last working day prior to the deadline.

How to pay Corporation Tax

Listed below are some of the ways you can pay your Corporation Tax. Whatever payment method you choose, the amount must reach HMRC before the due date, or a fine will be imposed.

• Payments made through Faster Payments, such as online or telephone banking, will reach HMRC within the same day or the next day, including weekends and bank holidays.

• Payments made via CHAPS will also reach HMRC within the same working day if you pay within your bank’s processing time.

• Payments made through BACS, direct debit (if already set up), or online payment using a debit or corporation credit card will take three working days.

• If you have never set up a direct debit but make a payment through it, your payment will reach HMRC in five working days.

What are the penalties for late filing?

If you file your returns late, pay your tax bill late, or provide inaccurate details, HMRC has the authority to fine you. It doesn't matter whether you or your accountant submitted the return or payment—you are responsible for paying the penalty to HMRC.

Here’s a list of penalties and the scenarios in which they apply:

Tips to keep in mind for easy Corporation Tax filing

While tax season can be a bit overwhelming, following these simple steps might help you avoid last-minute scrambling.

• Don't wait until the last minute to sort things out. Update your records regularly so everything stays aligned when needed.

• As a business, you might file multiple tax returns and pay multiple tax amounts. It is best practice to remember your deadlines so you don’t face delays or end up paying a penalty.

• Use cloud-based accounting software like Zoho Books, which makes it easier for you to set reminders for deadlines, prepare reports, record everything automatically, access real-time data, and much more.

• It is important to stay informed about even minor announcements related to taxes. So, keep yourself updated on UK tax laws.

• Estimate properly, plan ahead, and set aside funds for your taxes so you don’t run out of money when the deadline approaches.

Why opting for the right accounting software can be a game-changer

While there are multiple mandates a business must comply with, keeping track of everything while managing business growth can be overwhelming and may lead to missed deadlines. Choosing the right accounting software not only helps you stay on top of your finances but also ensures compliance through real-time reporting, automatic reminders, tax return filing, report generation, and more.

A word from Zoho Books

Coming soon! After successfully launching VAT in 2018, the Construction Industry Scheme (CIS) filing in 2024, and MTD for Income Tax earlier this year, Zoho Books is here with Corporation Tax and final accounts filing in the UK. We’re introducing features specific to UK Corporation Tax that will let you file your tax returns effortlessly. We will also be supporting Corporation Tax filing with micro-entity accounts.

Tax season doesn’t have to be hectic or filled with last-minute scrambling. With the right accounting software—like Zoho Books—you’ll have access to multiple features that make tax filing easier than ever.