Corporation Tax UK: Rates, Marginal Relief, Deadlines and Penalties

If you've just set up a limited company, Corporation Tax is the first tax that feels unfamiliar. There's no bill from HMRC. You work it out, pay it and report it yourself, and the dates catch people out because payment comes before the return. Here's what GOV.UK says, in plain English.

Who pays Corporation Tax

Corporation Tax is a tax your company or association pays to HMRC on profits made in an accounting period. GOV.UK lists three groups that pay it on profits from doing business:

• A limited company
• A foreign company with a UK branch or office, known as an overseas company
• A club, co-operative or other unincorporated association, such as a community group or sports club

Sole traders and partners don't pay it: they report profits through Self Assessment instead. If you're weighing that choice, my guide to sole trader vs limited company sets out the trade-offs. A UK resident company pays Corporation Tax on all its profits from the UK and abroad. A non-resident company with a UK branch pays only on profits from its UK activities.

The rates, as of October 2026

Taxable profits	Rate	What GOV.UK calls it
£50,000 or less	19%	Small profits rate
Between £50,000 and £250,000	Between 19% and 25%	Marginal Relief applies
More than £250,000	25%	Main rate

Taxable profits include profit from trading, investments, and selling assets for more than they cost, which GOV.UK calls chargeable gains. Your profit for Corporation Tax isn't the same as the profit in your annual accounts, because some costs aren't allowable and allowances change the figure.

Marginal Relief, and the associated companies trap

Marginal Relief gives a gradual increase in the rate between the small profits rate and the main rate, so a company with profits just over £50,000 doesn't jump straight to 25%. You can use HMRC's calculator to work out the exact relief.

Here's the detail most new directors miss. The £50,000 and £250,000 limits are divided by the number of associated companies, counting your own. GOV.UK's example: if your company has 3 other associated companies, the limits are divided by 4, so the lower limit becomes £12,500 and the upper limit becomes £62,500. Set up a second company for a side venture and both companies can lose most of the small profits rate.

The limits are also cut proportionately for an accounting period shorter than 12 months, which matters in your first year if your first period is short.

If two rates apply in one accounting period

Corporation Tax rates are set for financial years starting 1 April. If your accounting period straddles a change, you work out how many days each rate applied and the tax due for each. GOV.UK's worked example is a calendar year 2023 period: 90 days at the old rate (1 January to 31 March) and 275 days at the new rate (1 April to 31 December).

Deadlines: payment comes before the return

Task	Deadline
Pay Corporation Tax (most companies)	9 months and 1 day after the end of the accounting period
File the Company Tax Return	12 months after the end of the accounting period
Pay in instalments	If taxable profits are between £1.5 million and £20 million, or over £20 million (different schedules)

You must still file a return if you make a loss or have no tax to pay. If a payment deadline falls on a weekend or bank holiday, make sure the payment reaches HMRC on the last working day before it, unless you're paying by Faster Payments. HMRC charges interest on late payment and pays interest if you pay early.

Late filing penalties, as of October 2026

How late the return is	Penalty
1 day	£200
3 months	Another £200
6 months	HMRC estimates your Corporation Tax bill and adds a penalty of 10% of the unpaid tax
12 months	Another 10% of any unpaid tax

If your return is late 3 times in a row, the £200 penalties rise to £1000 each. At 6 months late, HMRC sends a tax determination, its own figure for what you owe, and you can't appeal against it: you have to file the return and pay. You can appeal a late filing penalty if you have a reasonable excuse, but only after you've filed.

How to get it right in your first year

1. Register the company with Companies House and set up Corporation Tax at the same time, or add it to your business tax account afterwards.
2. Note your accounting period end date and put both deadlines in the diary: payment at 9 months and 1 day, return at 12 months.
3. Count your associated companies before you estimate the tax, because it changes the thresholds.
4. Keep allowable costs separate from personal spending so your taxable profit is right.
5. Use the 17-character payment reference for the right accounting period when you pay.
6. File even if there's nothing to pay, and plan for Making Tax Digital if you're also self-employed.

My verdict

Corporation Tax isn't complicated, but it's unforgiving on dates. The two traps I'd flag for any small business owner are paying 3 months before the return is due, and the associated companies rule quietly shrinking your 19% band. Set the deadlines the day you incorporate, and if you're running more than one company, get an accountant to check the thresholds before you plan any dividends.

Frequently asked questions

What is the Corporation Tax rate in the UK?

As of October 2026, 25% on profits over £250,000 and 19% on profits of £50,000 or less, with Marginal Relief between those limits.

When do I pay Corporation Tax?

Most companies pay 9 months and 1 day after the end of the accounting period. Larger companies pay in instalments.

When is the Company Tax Return due?

12 months after the end of the accounting period it covers, even if you made a loss or owe nothing.

What are associated companies?

Companies connected to yours. The £50,000 and £250,000 limits are divided by their number, counting your own, so 4 companies means limits of £12,500 and £62,500.

What is the penalty for filing late?

£200 at 1 day late, another £200 at 3 months, then 10% of unpaid tax at 6 months and another 10% at 12 months, as of October 2026.

Do sole traders pay Corporation Tax?

No. Sole traders and partners report their profits through Self Assessment.