Corporation Tax for Small Businesses: Rates, Deadlines and How to Pay Less (Legally)
General information checked against GOV.UK guidance on 31 October 2026. Corporation Tax rules can depend on your company’s circumstances, so speak to a qualified accountant before making decisions.
If you run a UK limited company, understanding Corporation Tax can help you plan cash flow, meet deadlines and avoid paying more tax than you legally owe. The rules can feel daunting: the rate may depend on your profits, associated companies can change the thresholds, and accounting profit is not always the same as taxable profit.
This plain-English guide explains the current rates, how to register and pay, and some of the legitimate deductions and capital allowances that may reduce taxable profits. It is general information, not tax advice.
Corporation Tax rates for small businesses
For Corporation Tax financial years beginning on or after 1 April 2023, the rates are:
- Small profits rate: 19% where taxable profits are £50,000 or less.
- Main rate: 25% where taxable profits are more than £250,000.
- Marginal Relief: may apply to taxable profits between £50,000 and £250,000, gradually increasing the effective rate between the small profits and main rates.
These limits are reduced proportionately for short accounting periods and by the number of associated companies. For example, if there are two associated companies in total, the £50,000 lower limit and £250,000 upper limit are generally divided by two. The resulting limits are £25,000 and £125,000 for each company. The rules for deciding whether companies are associated can be complex, so check HMRC’s guidance on Corporation Tax rates and Marginal Relief.
Important: these are company tax rates, not the personal tax rates shareholders pay on dividends.
When is Corporation Tax due?
For companies with taxable profits of up to £1.5 million, Corporation Tax is normally due nine months and one day after the end of the accounting period. If profits are more than £1.5 million, different instalment payment rules may apply.
Your Company Tax Return is normally due 12 months after the end of the accounting period. That means the payment date usually comes before the filing deadline. For example, if an accounting period ends on 31 March, the usual payment date is 1 January the following year, and the return is due by 31 March.
A company may still need to file a return when it has no tax to pay. Check the GOV.UK overview of company accounts and tax return deadlines and how to pay Corporation Tax. Allow enough time for your chosen payment method to reach HMRC.
Registering for Corporation Tax
In general, a company that becomes active for Corporation Tax must tell HMRC within three months of starting its Corporation Tax accounting period. This is not necessarily three months from incorporation: an accounting period usually starts when the company begins business activity.
Use your company’s HMRC business tax account to add Corporation Tax services. You may need your company registration details, the date it started doing business and its Unique Taxpayer Reference. Check the current GOV.UK instructions for adding Corporation Tax services.
If your company has not started business activity, it may be dormant for Corporation Tax. Whether a company is active or dormant depends on its circumstances; confirm the position with HMRC or a qualified accountant if you are unsure.
How can a company reduce taxable profit legally?
The starting point is accurate records and correctly identifying the costs and allowances that apply. Do not claim personal costs as business expenses or buy something the company does not need simply to seek a tax reduction.
Claim allowable business expenses
Some day-to-day running costs may be deducted when working out taxable profit, provided they meet the relevant rules and are incurred for business purposes. The distinction between capital and revenue costs matters: buying equipment for long-term use, for example, may be treated differently from routine running costs.
Some costs are specifically disallowed. Client entertaining is one example. Keep clear records, receipts and explanations of business purpose, and review HMRC’s guidance on Corporation Tax expenses.
Check capital allowances for equipment
Capital expenditure is not normally deducted in the same way as day-to-day revenue expenses. However, capital allowances may allow a company to deduct some qualifying asset costs from profits:
- Annual Investment Allowance (AIA): currently allows a 100% deduction on qualifying plant and machinery costs, up to the £1 million allowance. Some items, such as business cars, are excluded. The allowance can be affected by the accounting period length and other rules. See HMRC’s AIA guidance.
- Full expensing: companies may be able to deduct 100% of the cost of qualifying new and unused main-rate plant and machinery in the year of purchase. It generally does not apply to cars or assets bought for leasing. See GOV.UK full expensing guidance.
- Writing-down allowances: where other allowances do not apply, qualifying costs may be relieved over time. For accounting periods beginning on or after 1 April 2026, the main-pool rate is 14%; the special-rate pool remains 6%. If a period spans the rate change, a hybrid calculation may be needed. See HMRC’s rates and pools guidance.
Eligibility depends on the asset, how it is used and the company’s accounting period. Check the conditions with a qualified accountant before relying on a particular allowance.
Dividends and owner-managers
Dividends are distributions to shareholders from company profits. They are not a business expense that reduces the company’s taxable profit. An owner-manager who receives dividends may also have personal tax to consider.
For the 2026–27 tax year, the dividend allowance is £500. Above that allowance, dividend income is taxed according to the shareholder’s income-tax band: 10.75% at the basic rate, 35.75% at the higher rate and 39.35% at the additional rate. The applicable band depends on total income, not dividends alone. See HMRC’s guidance on tax on dividends.
Salary and dividends have different tax and company implications. This guide does not recommend a particular remuneration approach; ask a qualified accountant to consider your circumstances.
Common Corporation Tax mistakes to avoid
- Missing the payment date: the Corporation Tax payment deadline is usually earlier than the Company Tax Return deadline.
- Assuming accounting profit equals taxable profit: tax adjustments and allowances may affect the final taxable figure.
- Overlooking associated companies: associated companies can reduce the thresholds at which rates apply.
- Treating every cost as deductible: capital costs and specifically disallowed expenses need different treatment.
- Forgetting to register when the company becomes active: check the registration requirements and relevant dates.
- Leaving records until year-end: timely bookkeeping can make it easier to identify errors and prepare for filing.
If your company also needs help keeping its statutory records and filings organised, explore our company secretarial support. You may also find our guides to iXBRL filing and Companies House software changes and the Autumn Budget 2026 useful for wider business planning.
Frequently asked questions
How much Corporation Tax will my small company pay?
It depends on taxable profits, the applicable Corporation Tax financial year, your accounting period and whether the company has associated companies. The 19% small profits rate applies at or below the relevant lower limit; the 25% main rate applies above the relevant upper limit, with Marginal Relief potentially available between them. A qualified accountant can calculate the amount for your company.
What expenses and allowances can I claim?
Some business-running costs may be deductible, while qualifying plant and machinery may qualify for capital allowances such as AIA or full expensing. The rules depend on the expense or asset and how it is used. Keep supporting records and ask a qualified accountant to confirm eligibility.
When do I need to pay and file?
For companies with taxable profits up to £1.5 million, payment is normally due nine months and one day after the accounting period ends. The Company Tax Return is normally due 12 months after period-end. Larger profits may be subject to instalment rules. Confirm your specific deadlines using HMRC guidance.
Does Your Business Admin provide tax advice or prepare Corporation Tax returns?
This article is general information, not tax advice. Your Business Admin is the trading name of NP UK Corporate Services Ltd and provides corporate services support. Service scope depends on your requirements. We can connect you with our team to discuss the corporate support you need; for tax advice, consult a qualified accountant.
How much does support cost, and what happens next?
Pricing depends on the service and scope, so no price is quoted here. Contact our team to explain what you need and ask about the relevant service inclusions and next steps. Any timings will depend on the service and information required.
Want help organising your company’s corporate records and compliance processes? Contact the Your Business Admin team to discuss your requirements.
This article is general information only and is not tax, legal or financial advice. Tax rates and rules may change. Check current GOV.UK guidance and consult a qualified accountant about your company’s position.