What is corporation tax? UK rates and deadlines for 2026/27

Corporation tax is the UK government's tax on the net profits your company earns. If you run a limited company registered with Companies House, you're required to calculate, report, and pay this tax yourself.

What is corporation tax?

Corporation tax is a direct tax that HM Revenue and Customs (HMRC) charges on the profits of UK companies. Unlike income tax, which applies to individuals, corporation tax applies to the earnings of limited companies, certain clubs, and other organisations that turn a profit.

The tax works on a self-assessment basis. HMRC won't send you a bill or a reminder. Your company is responsible for calculating its own tax liability, filing a Company Tax Return, and paying what it owes by the deadline.

Your company's tax year doesn't follow the standard April-to-April calendar. Corporation tax runs on your company's own accounting period, which you choose when you register with HMRC.

Who pays corporation tax in the UK?

Three main types of organisations owe corporation tax. Your obligations depend on where your company is based and how it operates.

Limited companies

Every limited company registered with Companies House pays corporation tax on its profits. This includes both private limited companies and public limited companies. If your company is UK-resident, you'll pay corporation tax on your worldwide profits, not only the money you earn within the UK.

HMRC determines your company's UK residency based on where it's managed and controlled. That typically aligns with where the board of directors makes key decisions, though HMRC looks at where real control is exercised. That distinction matters if you have directors based in multiple countries.

Foreign companies with a UK branch

If your company is registered outside the UK but operates a branch or office here, you'll pay corporation tax on the profits from those UK activities only. Double taxation agreements between the UK and other countries can reduce or eliminate the risk of being taxed twice on the same income.

Clubs, co-operatives, and unincorporated associations

Corporation tax isn't limited to companies in the traditional sense. Sports clubs, community groups, co-operatives, and other unincorporated associations pay it too, provided they earn taxable profits.

What profits does corporation tax cover?

Corporation tax applies to the total taxable profit your company earns during its accounting period. That figure comes from three income streams, minus the expenses you're allowed to deduct.

Trading profits

These are the earnings your company generates from its core business activities. Revenue from selling products or delivering services counts as trading profit. For most businesses, this is the largest component of their corporation tax calculation.

Investment income and chargeable gains

Your company also pays corporation tax on income from investments. That includes interest on savings and rental income from property. Chargeable gains fall into this category too. If you sell a business asset like property, equipment, or shares for more than you originally paid, the profit on that sale is taxable.

Allowable deductions and capital allowances

You don't pay corporation tax on your gross revenue. You calculate it after subtracting allowable business expenses like employee wages, office rent, and professional fees. Keeping clean, accurate records of these costs directly affects how much tax you owe.

Capital expenditure works differently from regular day-to-day expenses. Instead of deducting the full cost of a large asset in the year you buy it, capital allowances let you deduct a portion of the cost each year through writing down allowances. This applies to vehicles, machinery, and equipment. The Annual Investment Allowance (AIA) lets most businesses deduct up to £1 million of qualifying capital expenditure in a single year, which covers the vast majority of small and mid-sized company purchases.

What are the corporation tax rates for 2026/27?

The amount of corporation tax you pay depends on how much taxable profit your company earns. The UK uses a two-tier rate structure with a transitional band in between.

The small profits rate and main rate

If your taxable profits are £50,000 or less, you pay the small profits rate of 19%. If your taxable profits are above £250,000, you pay the main rate of 25%.

Marginal relief for profits between £50,000 and £250,000

If your company's profits fall between £50,000 and £250,000, you won't jump straight from 19% to 25%. You'll qualify for marginal relief, which gradually increases your effective rate as your profits rise through that band. HMRC provides a formula for calculating the exact amount of relief.

How associated companies affect your corporation tax thresholds

If you control or are connected to other companies, HMRC divides the £50,000 and £250,000 thresholds equally among all associated companies. Two associated companies means the small profits threshold drops from £50,000 to £25,000 for each. Three associated companies drops it to roughly £16,667.

This rule exists to prevent business owners from splitting profits across multiple entities to stay within a lower tax band.

How to register, file, and pay corporation tax

Corporation tax is self-assessed, so HMRC expects you to manage the entire process from registration through payment.

Registering with HMRC

You must register your company for corporation tax within 3 months of starting to trade or receiving any form of income. You register online through your company's HMRC account. Once you've registered, HMRC will confirm your company's unique taxpayer reference (UTR) and the accounting period they have on record.

If you've incorporated a company but it isn't trading or earning income, it counts as dormant. Dormant companies still need to notify HMRC, but they won't owe any tax until they become active.

Filing your Company Tax Return (CT600)

Your company must file a CT600 with HMRC for every accounting period, even if you made a loss or owe nothing. The filing deadline is 12 months after the end of your accounting period. If your accounting period ends on 31 Mar 2027, your CT600 would be due by 31 Mar 2028.

The CT600 reports your company's income, expenses, and the amount of corporation tax you've calculated as owing. You'll typically use accounting software or an accountant to prepare and submit this return electronically through HMRC's online services.

Payment deadlines and quarterly instalments

For most companies, corporation tax is due 9 months and 1 day after the end of your accounting period. Using the same example, if your period ends 31 Mar 2027, payment is due by 1 Jan 2028. The filing and payment deadlines are separate.

If your company's annual profits exceed £1.5 million, you'll pay on a different schedule. Instead of one lump sum, you'll make quarterly instalment payments spread across the accounting period. The first instalment is due 6 months and 13 days after the start of the period, with three more payments at 3-month intervals.

What are common corporation tax mistakes?

Here are the most frequent corporation tax errors and how to avoid them.

Missing the payment deadline

The 9-month-and-1-day deadline is firm. HMRC charges interest from the day after the due date on any late payment. Adding the payment date to your accounts preparation calendar early gives time to arrange the funds.

Overlooking allowable deductions

Commonly missed deductions include staff training costs, home office costs for directors, and business travel expenses. Claiming all eligible expenses reduces your taxable profit and your final tax bill.

Tracking expenses as they happen reduces the chance of missing deductions at year-end. Real-time expense management tools capture costs as they occur rather than relying on bank statement reconstructions later.

Track every deductible expense with Ramp

Ramp is a spend management platform for UK businesses that automates expense tracking, receipt capture, and categorisation in one workflow.

Your corporation tax bill is only as accurate as your expense records. Allowable deductions for staff training, business travel, and professional fees add up across a full accounting period, and each one lowers your taxable profit. Ramp categorises expenses automatically as they’re incurred and captures receipts at the point of purchase, so your records are complete well before your accounting period closes.

Ramp syncs with Xero, QuickBooks, and Sage, so categorised expenses flow straight into the software your accountant uses to prepare your CT600. Every deduction is already categorised and documented when it’s time to file.

See how Ramp works for UK businesses.