When and how to pay corporation tax – a guide for UK businesses

UK limited companies pay corporation tax on their profits. But what is corporation tax, when is corporation tax due, and what are the rates?

What are the corporation tax rates?

The corporation tax rate for company profits is between 19 per cent and 25 per cent, depending on how much profit a business makes.

How much is corporation tax for a limited company?

You need to pay the rate that applied in your company’s accounting period for corporation tax (the time covered by your company tax return).

You can check your company’s accounting period by signing in to HMRC’s online service. It’ll usually be in line with your company’s financial statements and annual accounts. Most businesses have a 12-month accounting period – your accounting period can’t be longer than 12 months.

How to register for corporation tax

You’ll automatically register for corporation tax when you register your limited company with Companies House. After this, HMRC will send you a confirmation letter with your corporation tax number. You’ll need to use this number when communicating with HMRC and submitting your corporation tax return. 

While you’ll be automatically registered for corporation tax, you’ll need to go through the process of adding corporation tax to your HMRC online services account. Here’s how: 

• register with HMRC – if you haven’t already done so, you can set up an account with HMRC to access tax services online 
• add corporation tax to your account – once your account is created and you’ve logged in, you can add corporation tax by selecting ‘enrol for service’ 
• provide your company details – you’ll then need to fill in a form containing essential information about your company, like company registration number, start date of trading, and your corporation tax number
• complete the authorisation process – once you’ve submitted the registration form, HMRC will send you an authorisation number in the post. Once you’ve received it, log back into your HMRC online services account and enter the code to access your corporation tax information

How to pay corporation tax – payment methods explained

Adding corporation tax to your HMRC online services account means you’ll be paying corporation tax online – you can’t pay corporation tax by post.

Bear in mind that you need to allow time for your payment to get to HMRC, depending on your payment method:

HMRC has now stopped accepting payments by personal credit card.

When do you pay corporation tax?

This is where things get complicated, because the corporation tax payment deadline differs from other taxes, and depends on your accounting period:

• you need to pay corporation tax before you file your company tax return
• the deadline to pay is nine months and one day after the end of your accounting period for your previous financial year – so if your accounting period ends on 31 March, your corporation tax deadline is 1 January
• but you need to prepare your company tax return to work out how much corporation tax to pay – even though the deadline to file your company tax return is later (12 months after the end of the accounting period it covers)

If you’ve just started your small business, you may have two corporation tax accounting periods, as your accounting period can’t be longer than 12 months.

For example, if you start your business in January, your first accounting period can go up to 31 March, when you’ll start a full 12-month accounting period.

Businesses with more than £1.5 million in profits will need to pay their corporation tax in instalments, so the process is different. And, even if your company is loss-making and you have no corporation tax due, you still need to declare that to HMRC.

Read more about how to file a corporation tax return.

What are the corporation tax allowances?

There are some corporation tax allowances available when working out how much tax you owe. You can deduct the costs of running your business from your company’s profits before tax when you prepare your accounts. But, if you or your employees get use from something, it must be treated as a benefit.

Some examples of allowable expenses for limited companies include:

• mileage
• accommodation
• training

These expenses must be necessary to the business and ‘wholly and exclusively’ for business purposes. This essentially means that you don’t also use them in a personal capacity.

Some costs of running your business aren’t allowed for corporation tax, such as entertaining clients.

Buying business assets that you keep to use in your business, such as equipment, machinery, and vehicles, can’t be deducted from your company’s income when calculating your taxable profit. In these instances, you may be able to claim capital allowances.

What are the corporation tax reliefs?

There are corporation tax reliefs available that you could use to minimise your corporation tax bill:

• Research and Development (R&D) relief: you may be able to claim this if your company works on innovative projects in science and technology
• The Patent Box: a lower rate of corporation tax is available on profits earned from patented inventions and certain other innovations
• Creative industry tax reliefs: this allows companies in the creative industries (such as film, television, and video gaming) to claim a larger deduction when calculating taxable profits
• Disincorporation Relief: a relief that allows a company to transfer assets to its shareholders (for instance when it changes from a limited company to a sole trader or partnership) without the company incurring a corporation tax charge on the disposal of those assets
• Terminal, capital and property income losses, and trading losses: you could be eligible if you make a loss from trading, the sale or disposal of a capital asset or on property income
• Marginal Relief: this may be available if your company had profits between £300,000 and £1.5 million that were from before 1 April 2015. As of 1 April 2023, it can be used by companies with profits between £50,000 and £250,000 to calculate their effective corporation tax rate between 19 per cent and 25 per cent
• Relief of goodwill and relevant assets: after April 2019, the rules changed so you may be able to get relief on some purchases of goodwill and relevant assets

Read more about tax reliefs for small businesses.

How to calculate corporation tax – UK corporation tax calculator

Using a limited company tax calculator can be useful as it’s easy to work it out incorrectly on your own. This way, you’ll get a better idea of what you’ll be paying and won’t get an unexpected bill.

Usually, you’ll need details on your business like:

• annual revenue
• gross salary (excluding National Insurance)
• annual expenses
• annual pension contributions.

You should try to be proactive with your approach to your corporation tax. Our guide to creating a budget for your small business is a good way of making sure you’re prepared for your tax bill.

What if you’re struggling to pay corporation tax?

If you’re struggling, HMRC has a Time to Pay service that you might be able to use to spread the cost of your tax bill.

So if you haven’t already received a payment demand letter, you should call HMRC on 0300 200 3820 to discuss Time to Pay. If you have received a letter, you can get in touch with the HMRC office that sent you the letter.

All about corporation tax – FAQs

We’ve answered common questions about corporation tax in the FAQs below. You can also find out more about other company taxes in our business tax guide. 

Will all companies have to pay 25 per cent corporation tax?

Not all companies will have to pay 25 per cent corporation tax. The percentage of tax you have to pay depends on your profits: 

• business with profits of £50,000 or less pay 19 per cent 
• businesses with profits above £250,000 pay 25 per cent
• business with profits between £50,000 and £250,000 between 19 per cent and 25 per cent

How do I avoid 25 per cent corporation tax?

You can’t avoid paying the corporation tax that your company is liable for. There are a number of corporation tax reliefs available that you could use to minimise your corporation tax bill. If your business had profits of less than £50,000, you’ll only need to pay corporation tax at the small profits rate of 19 per cent. 

What income does a limited company pay corporation tax on?

A company needs to pay corporation tax on:

• the profits it makes from doing business (‘trading profits’)
• its investments
• selling assets for more than they cost (‘chargeable gains’)

Company assets include land and property, equipment and machinery, plus company shares.

Tax guides for small businesses

• How does VAT affect businesses in the UK?
• A guide to dividend tax and the dividend tax rate

• What are business rates?
• What business insurance do I need?