Corporation Tax Explained: Rates, Computation and CT600 Filing

Corporation Tax Explained

Corporation Tax is the tax UK limited companies pay on their taxable profits. It applies to trading profits, investment income and chargeable gains. Unincorporated businesses (sole traders, partnerships) don't pay Corporation Tax — they pay Income Tax via Self Assessment instead.

Rates for 2025/26

• Small profits rate: 19% for profits up to £50,000.
• Main rate: 25% for profits of £250,000 or more.
• Marginal relief applies between £50,000 and £250,000, giving an effective rate that rises smoothly from 19% to 25%.

The thresholds are reduced if you have associated companies (broadly, companies under common control) — divide the limits by the total number of associated companies plus one.

How to calculate taxable profits

Start with your accounting profit, then apply tax adjustments:

Accounting profit
  + add back: depreciation, entertaining, fines, non-allowable expenses
  - capital allowances (AIA, full expensing, WDA)
  - trading loss relief brought forward
  - R&D relief (if eligible)
= Taxable profit
× Corporation Tax rate
= Tax due

The CT600 return

You must file a Company Tax Return (CT600) with HMRC for every accounting period. It includes:

• Profit and loss summary
• Tax computation
• iXBRL-tagged accounts and computations
• Any supplementary pages (R&D, loans to participators, etc.)

Most companies must file online using compatible commercial software or an accountant. HMRC's old joint accounts and Company Tax Return service closed on 31 March 2026; see HMRC's current filing guidance for the software route and exceptions.

For supported UK micro-company returns, Unfiled prepares your accounts, tax computation and CT600 and lets you submit them directly to HMRC after review and declaration. It checks your company and period before payment and shows HMRC's response. See how to file your CT600 with Unfiled.

Deadlines

• Pay Corporation Tax: 9 months and 1 day after the end of the accounting period.
• File CT600: 12 months after the end of the accounting period.

So for a year ending 31 March 2026: pay by 1 January 2027, file by 31 March 2027.

Companies with profits over £1.5 million pay in quarterly instalments.

Common reliefs and allowances

• Annual Investment Allowance (AIA): 100% deduction on plant and machinery up to £1 million.
• Full expensing: 100% first-year deduction for new qualifying plant and machinery (no cap, companies only).
• R&D tax relief: enhanced deduction or payable credit for qualifying R&D activity.
• Loss relief: carry losses back 1 year, sideways against other profits, or forward indefinitely.

Penalties

• £100 for filing CT600 1 day late, another £100 at 3 months.
• 10% of unpaid tax at 6 months, another 10% at 12 months.
• Daily interest on late-paid tax at the rate applicable to the payment dates.

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This is general guidance for the 2025/26 UK tax year and is not personal tax advice. Always check the latest figures on GOV.UK or speak to a qualified accountant for your situation.

UK Corporation Tax rates at a glance (2025/26)

These thresholds are divided by the number of associated companies plus one. Two companies in total (this company and one other associated company) means limits of £25,000 and £125,000 each for a full year; short periods reduce them further.

How Corporation Tax is calculated, step by step

1. Start with accounting profit — the profit before tax in your accounts.
2. Add back disallowable costs — client entertaining, depreciation, fines and penalties, and non-business expenses.
3. Deduct capital allowances — including the Annual Investment Allowance and full expensing for qualifying plant and machinery.
4. Adjust for losses and reliefs — brought-forward losses, R&D relief, group relief.
5. Apply the rate to the resulting taxable profit and deduct marginal relief if profit falls between £50,000 and £250,000.

Worked example. Accounting profit £120,000, with £4,000 of entertaining, £9,000 depreciation and £15,000 of capital allowances.

• Taxable profit: £120,000 + £4,000 + £9,000 − £15,000 = £118,000
• Tax at 25%: £29,500
• Marginal relief: (£250,000 − £118,000) × 3/200 = £1,980
• Corporation Tax due: £27,520 (an effective rate of 23.3%)

Key dates

Payment is due 9 months and 1 day after your accounting period ends. The CT600 return is due 12 months after the period ends — so the money is always due before the paperwork.