Corporation Tax is one of the most important taxes your business will ever deal with. If you run a limited company in the UK, Corporation Tax applies to the profits your business makes and must be calculated, reported, and paid correctly every year.

Unlike Income Tax, which applies to individuals and sole traders, Corporation Tax applies to UK-registered limited companies and some organisations, including clubs and associations. Understanding how it works — and how to minimise it legally — can have a major impact on your company’s cash flow, growth, and long-term success.

At its core, Corporation Tax is charged on:

• Trading profits

• Investment income

• Capital gains (after allowances and reliefs)

This page explains what Corporation Tax is, how much you pay, key deadlines, allowable deductions, and how professional tax planning can reduce your bill.

You must register for and pay Corporation Tax if your business operates as a limited company in the UK. This applies whether you are actively trading or dormant.

Corporation Tax typically applies to:

• Private limited companies (Ltd)

• Public limited companies (PLC)

• UK branches of overseas companies

• Members’ clubs and associations (in some cases)

You do not pay Corporation Tax if you are:

• A sole trader

• In a general partnership (partners pay Income Tax instead)

• A limited liability partnership (LLP), unless structured otherwise

Even if your company makes no profit, you may still need to file a Corporation Tax return to confirm this to HM Revenue & Customs.

Corporation Tax is charged at different rates depending on your company’s taxable profits.

Current UK Corporation Tax structure:

• Small Profits Rate: Applies to companies with profits below a set threshold

• Main Rate: Applies to companies with higher profits

• Marginal Relief: Applies if profits fall between the two thresholds

Because rates and thresholds can change, it’s essential to plan ahead — particularly if your company’s profits fluctuate year to year.

Poor forecasting can result in:

• Unexpected tax bills

• Missed reliefs

• Cash flow pressure

A qualified accountant can ensure your business applies the correct rate and takes advantage of available reliefs.

Corporation Tax is not charged on turnover — it is charged on taxable profit.

Taxable profit generally includes:

• Sales income minus allowable expenses

• Investment income (e.g. interest)

• Capital gains on the sale of assets

Before tax is calculated, your accountant will:

1. Prepare statutory accounts

2. Adjust profits for tax purposes

3. Apply reliefs and allowances

This process ensures your tax bill is accurate and compliant, while avoiding overpayment.

One of the most effective ways to reduce Corporation Tax is by claiming all legitimate business expenses.

Common allowable expenses include:

• Staff wages and employer NICs

• Office rent and utilities

• Professional fees (accountants, solicitors)

• Marketing and advertising

• Software and subscriptions

• Travel costs (business use only)

Expenses must be:

• Wholly and exclusively for business purposes

• Properly documented

Incorrect or missed claims can significantly increase your tax bill, which is why structured bookkeeping and expert review are essential.

Rather than deducting large purchases in one go, businesses often claim capital allowances.

These apply to:

• Equipment and machinery

• Computers and IT systems

• Vehicles (with restrictions)

• Certain building improvements

The Annual Investment Allowance (AIA) may allow you to deduct the full cost of qualifying assets in the year of purchase, reducing your Corporation Tax liability immediately.

Strategic timing of asset purchases can:

• Lower taxable profits

• Improve cash flow

• Support business growth

This is an area where proactive tax planning delivers real financial benefits.

Every limited company must file a Corporation Tax return (CT600).

Key deadlines:

• Register for Corporation Tax: Within 3 months of starting trading

• Pay Corporation Tax: Usually within 9 months and 1 day after year-end

• File CT600: Within 12 months of the accounting period end

Late filing or payment can result in:

• Automatic penalties

• Interest charges

• HMRC compliance checks

Using an accountant ensures deadlines are met and returns are filed accurately the first time.

Corporation Tax planning is about legally minimising tax, not avoiding it.

Effective strategies may include:

• Director salary and dividend optimisation

• Pension contributions

• Timing income and expenses

• Group relief (for multiple companies)

• Loss relief and carry-forward planning

Good tax planning is proactive — not something done after the year has ended. The earlier it starts, the more control you have over your final tax position.

Many SMEs overpay Corporation Tax due to avoidable errors.

Common mistakes include:

• Missing allowable expenses

• Incorrect asset treatment

• Late filing penalties

• Poor record-keeping

• No forward tax planning

These issues often arise when businesses rely solely on software or handle tax internally without expert oversight.

Professional support reduces risk and often pays for itself through tax savings.

Corporation Tax is not just a compliance requirement — it’s a planning opportunity.

A specialist accountant will:

• Calculate and file your Corporation Tax return

• Ensure compliance with HMRC regulations

• Identify tax-saving opportunities

• Advise on growth-focused tax strategies

• Act as your representative with HMRC

Whether you’re a startup or an established company, expert guidance gives you confidence, clarity, and control over your business finances.