Welcome to the world of corporation tax – a place filled with numbers, rules, and regulations that can give even the most seasoned business owners a bit of vertigo.
In this broad and comprehensive guide, we’ll break down the fundamentals of corporation tax in a way that’s easy to understand and apply to your business.
From figuring out if you need to pay to calculating your bill and exploring ways to minimise your tax liabilities, we’ll cover it all.
Without further preamble, let’s jump in.
Who Has to Pay Corporation Tax?
First things first, let’s figure out who actually has to pay corporation tax. If you’re a limited company, a foreign company with a UK branch or office, or an unincorporated association like a club or co-op, then you’ll have to account for Corporation Tax.
Whether you’ll actually have to ‘pay’ in the strictest sense of the word depends on whether you make a profit.
Here’s a quick rundown of the types of businesses that need to pay up:
- Limited companies: If you’ve registered your business as a limited company with Companies House, then you’re on the hook for corporation tax. This applies whether you’re a small startup or a big multinational.
- Foreign companies: Got a branch or office in the UK? Then you’ll need to pay corporation tax on any profits that branch or office makes. Even if your main headquarters are overseas, HMRC still wants a slice of the pie.
- Clubs, co-ops, and unincorporated associations: If your club or association is making a profit, then you might need to pay corporation tax. It depends on how you’re set up and what you’re using the profits for.
One thing worth adding here: even if you make a loss or owe nothing, you still have to file a Company Tax Return if HMRC sends you a notice to deliver one. A dormant company can stop filing once HMRC has accepted it’s dormant, unless it later asks for a return.
Calculating Your Tax Bill
How do you actually work out how much corporation tax you owe? It all comes down to your taxable profits. This means adding up all your income (trading profits, investment income, capital gains, etc) and then subtracting any allowable expenses and reliefs.
What counts as an allowable expense? At its most simple, any costs that are purely for business purposes. This can include things like:
- Salaries, bonuses, and other staff costs
- Rent, utilities, and property maintenance
- Marketing, advertising, and promotional expenses
- Travel and accommodation costs for business trips
- Raw materials, equipment, and other supplies
It’s important to keep a clear record of all your income and outgoings – trust us, it’ll make your life a lot easier when it comes to tax time. Make sure you keep hold of receipts, invoices, and any other relevant paperwork for at least six years.
There are also some expenses that you might think are allowable but actually aren’t. For example, you can’t claim back entertainment costs, like taking a client out for a fancy dinner.
And if you’re using something for both business and personal purposes (like your phone or car), you can only claim the business portion as an expense.
Corporation Tax Rates (2026/27)
You’ve worked out your taxable profits – now what? Well, the amount of corporation tax you’ll pay depends on how much profit you’ve made. For the 2026/27 tax year, the rates are:
- 19% for profits up to £50,000. This is called the “small profits rate”.
- 25% for profits over £250,000. This is the “main rate”.
- A gradual increase between the two for profits from £50,000 to £250,000. This is known as “marginal relief”.
The government has committed to keeping the main rate at 25% for the rest of this parliament, but it’s always a good idea to check the latest figures on the gov.uk website.
If your business is part of a group (i.e., you have subsidiaries or sister companies) or you control more than one company, then you might need to do some extra calculations. The thresholds for the small profits rate and marginal relief are divided by the number of associated companies, plus one.
So, if you’ve got one associated company, you’ll start paying the main rate on profits over £125,000 (£250,000 divided by two) instead of £250,000, and the small profits rate ends at £25,000 instead of £50,000.
When Do You Pay Corporation Tax?
One of the most common questions we get asked about corporation tax is “when do I actually have to pay it?”.
The key concept to understand here is your “accounting period”. This is the period of time that your corporation tax bill covers. For most companies, the accounting period is 12 months long, and it can’t be longer than 12 months for corporation tax, though it can be shorter (for your first period of trading, for instance).
Your corporation tax payment deadline is usually 9 months and 1 day after the end of your accounting period. So, if your accounting period ends on 31 December, your corporation tax will be due on 1 October the following year.
Your Company Tax Return (the CT600) is due later, 12 months after the end of your accounting period, so the payment usually falls due before the return does.
If Profits Exceed £1.5 Million
If your company’s taxable profits exceed £1.5 million, you’re required to pay Corporation Tax in instalments. For a standard 12-month accounting period, the payment schedule is as follows:
- First instalment: Due 6 months and 13 days after the start of your accounting period.
- Second instalment: Due 3 months after the first instalment.
- Third instalment: Due 3 months after the second instalment.
- Final instalment: Due 3 months and 14 days after the end of your accounting period.
For example, if your accounting period begins on January 1, the instalments would be due on July 14, October 14, January 14 (of the following year), and April 14 (of the following year).
Please note that these thresholds are adjusted if your accounting period is shorter than 12 months or if your company has associated companies. Additionally, companies with taxable profits exceeding £20 million are subject to an accelerated instalment schedule.
It’s crucial to get your payment in on time. If you’re late, HMRC will charge interest and you might face penalties. If you’re really struggling to pay, contact HMRC as soon as possible – they might be able to arrange a payment plan.
Responsibilities for Directors
If you’re a company director, the buck stops with you when it comes to corporation tax. It’s your responsibility to ensure that your company:
- Keeps accurate accounting records. You need to keep track of all your income and expenses, and maintain clear, organised records. HMRC can ask to see your records at any time.
- Prepares and files its Company Tax Return (CT600). From 1 April 2026, this must be done using commercial software, as HMRC’s free filing service has closed. The deadline is 12 months after the end of your accounting period.
- Pays its corporation tax on time. As we’ve seen, this is usually 9 months and 1 day after the end of your accounting period.
- Notifies HMRC of any changes. If there are any significant changes to your company (like a change of address, or if you start doing a different kind of business), you need to let HMRC know.
As a director, you can delegate some of these tasks to other people (like your accountant), but the ultimate responsibility lies with you. If your company doesn’t meet its corporation tax obligations, you could face personal fines or even disqualification as a director.
It’s a big responsibility, but don’t panic. The key is to stay organised, keep good records, and seek professional advice if you’re unsure about anything. At Double Point, we’re always here to help.
Self-Assessment for Directors
As a company director, you’ll often need to file a personal Self-Assessment tax return alongside your company’s Corporation Tax return.
This is because directors often receive income from their company in the form of dividends, which need to be declared on your personal tax return.
Here’s what you need to know:
- You may need to register for Self-Assessment. If you receive dividends over £10,000 or other untaxed income, you’ll need to register and file. You must do this by 5 October following the end of the tax year. Smaller dividend amounts can sometimes be handled by asking HMRC to adjust your tax code.
- You need to declare all your income. On your Self-Assessment return, you declare all your income, not just your director’s salary and dividends. This includes any other employment income, self-employment profits, rental income, and interest from savings.
- Dividends have their own rates. You have a £500 tax-free dividend allowance. Above this, for 2026/27, basic rate taxpayers pay 10.75%, higher rate taxpayers pay 35.75%, and additional rate taxpayers pay 39.35% – the basic and higher rates having risen two points this year.
- The deadlines are important. Your Self-Assessment tax return is due by 31 January following the end of the tax year. For dividends taken in 2026/27, that’s 31 January 2028.
- You might need to make payments on account. If your Self-Assessment bill is over £1,000 and less than 80% was taxed at source, you’ll usually make ‘payments on account’ towards next year’s bill, due on 31 January and 31 July.
One new point for directors of close companies (broadly, those controlled by five or fewer people): from the 2025/26 return onwards, you have to give extra detail where you complete the relevant pages – the company’s name and registration number, the dividends you received from it, and your percentage shareholding.
Filing a Self-Assessment return can be complicated, especially when you have multiple sources of income. Our self-assessment service can take it off your plate.
Expert Tips for Reducing Your Tax Bill
Now, we know what you’re thinking – how can I pay less corporation tax? Well, there are a few legitimate ways to reduce your tax bill. Here are some expert tips:
- Claim all your allowances and reliefs. You might be able to claim capital allowances on equipment you’ve bought, or R&D tax relief if you’re doing innovative work. Note that the main writing-down allowance dropped from 18% to 14% from April 2026, though a new 40% first-year allowance now applies to qualifying new plant and machinery, and the £1 million Annual Investment Allowance still gives full relief on qualifying spending.
- Make the most of tax-free allowances. You can earn up to £500 in dividends before you start paying tax on them. If you’re a director, you might want to pay yourself a mix of salary and dividends to take advantage of these allowances.
- Plan ahead. Think about the timing of your income and expenses. If you’re near the £50,000 threshold, a bit of forward planning can make a real difference.
- Get professional advice. Tax can be complicated, and there are lots of nuances and exceptions. Our tax planning service is built around making sure nothing gets missed.
How to Submit Your Corporation Tax Return: Where, When, and How
Your Corporation Tax return (CT600) must be submitted to HMRC, not Companies House.
Many business owners assume these filings are the same, but they serve different purposes:
- HMRC – Handles your Corporation Tax return and calculates your tax liability.
- Companies House – Manages your company’s annual accounts and ensures compliance with corporate reporting rules.
These are separate submissions. Note that HMRC’s free joint filing service (often called CATO) closed on 31 March 2026, so the option to file both together for free has gone.
So What Gets Submitted to Companies House?
Companies House requires you to file your annual accounts, which provide a financial description of your business. Depending on your company’s size, you may need to submit:
- Full accounts (for larger companies) – Includes a profit and loss account, balance sheet, directors’ report, and auditor’s report.
- Small or micro-entity accounts (for smaller companies) – A simplified version with reduced disclosures.
- Dormant company accounts (if no trading activity occurred during the year).
Annual accounts must be submitted to Companies House within 9 months of the end of your company’s financial year (or 21 months from incorporation for your first accounts). Our company accounts service handles this for you.
How Do You File Your Corporation Tax Return?
From 1 April 2026, most companies must file their Corporation Tax return online using commercial software. HMRC’s free online service has closed, and paper returns are only accepted in narrow cases, such as filing in Welsh or with a reasonable excuse.
Your software needs to file the CT600, the tax computation, and your company accounts together with HMRC. To file, you’ll need:
- Your company’s annual accounts (prepared before submitting your return).
- A Government Gateway account to access HMRC’s filing system.
- Your Unique Taxpayer Reference (UTR) issued by HMRC.
If you’re choosing software for the first time, our guide to choosing software is a good place to start.
Six Things You Need to Know About Corporation Tax
Now that we’ve covered the basics, let’s look at some of the finer points of corporation tax. These are the details that can really make a difference to your tax bill.
- You can deduct pre-trading expenses. If you incurred costs before your company started trading (like legal fees or market research), you might be able to deduct these from your first year’s profits.
- You can claim back overpaid tax. If you think you’ve paid too much corporation tax, you can make a claim to HMRC to get it back. You have four years from the end of the accounting period to make a claim.
- You can get relief for losses. If your company makes a loss, you might be able to claim relief by offsetting the loss against other profits or carrying it forward to set against future profits.
- You need to keep records for six years. HMRC can investigate your company’s tax affairs going back up to six years, so it’s important to keep your records for at least this long.
- You can get a deduction for charitable donations. If your company makes donations to charity, you can deduct these from your taxable profits.
Get Help With Double Point
At Double Point, we know that corporation tax can be a headache. That’s why we’re here to help.
Our team of expert accountants can take care of everything for you – from calculating your profits to claiming your allowances to submitting your tax return.
We don’t just manage the numbers. We’ll also provide expert advice and guidance on how to optimise your tax position. We’ll help you plan ahead, make the most of allowances and reliefs, and keep you up to date with the latest changes in tax law.
So, if you want to take the stress out of corporation tax, book a consultation with us today. We’ll make sure you’re paying the right amount of tax – not a penny more, not a penny less.