Corporate Tax in the UK: What it is and how it applies to your business

Corporate Tax in the UK is a tax paid by a company or an association to HM Revenue and Customs (HMRC) on its profits. A company classed as UK‑resident for tax purposes must pay Corporate Tax on all its profits, whether arising in the UK or abroad. Conversely, a non‑UK‑resident company with an office, branch or rental property in the UK pays tax only on profits generated from its UK activities.

In addition to meeting standard tax obligations, large UK businesses with annual turnover above £200 million or a balance sheet exceeding £2 billion are legally required to publish a tax strategy. This requires a clear statement showing how the company manages tax risk, approaches tax planning, and engages with HMRC.

Understanding the Corporate Tax Return

A Corporate Tax return is the formal submission to HMRC that reports your company’s income, expenditure and tax liability. This submission comprises a CT600 form (alongside any supplementary pages), the company’s accounts and a tax computation explaining how the Corporation Tax liability has been calculated.

HMRC normally sends a “Notice to deliver a Company Tax Return” (form CT603), specifying the accounting period (AP) to which it applies. If your AP differs from the period stipulated, perhaps because it exceeds twelve months – you may have two filing periods, as each Corporation Tax period must not exceed twelve months. If the CT603 appears incorrect, companies should contact HMRC’s Corporation Tax services for clarification.

The filing process for Corporation Tax returns has become increasingly complex, due to evolving UK legislation and international standards such as the OECD’s anti-avoidance measures. As a result, professional support is strongly recommended to ensure accurate tax compliance and avoid costly errors.

How Corporate Tax is calculated in the UK

Corporate Tax is derived by adjusting your company’s accounting profit: adding back disallowed elements such as depreciation, then subtracting reliefs such as capital allowances. The result is the taxable profit, which is subject to Corporate Tax.

As of April 2025, the UK applies a tiered rate structure: companies with profits under £50,000 are charged at the small profits rate of 19%, while those with profits exceeding £250,000 are taxed at the main rate of 25%. For companies with profits between £50,000 and £250,000, marginal relief applies, providing a gradual escalation between the lower and main rates. Associated-company rules apply, effectively dividing the profit limits across related companies.

Certain types of reliefs and incentives can also reduce the effective Corporation Tax rate for eligible businesses. For example, profits linked to patented inventions may qualify for Patent Box relief, reducing the effective tax rate to 10%. Additionally, companies operating in group structures may benefit from group loss relief, allowing them to offset losses across subsidiaries to reduce overall liability.

Large multinational businesses should also be aware of the OECD’s Pillar Two rules, which introduce a global minimum tax regime and domestic top-up taxes. These are designed to ensure that large groups pay a minimum level of tax across all jurisdictions where they operate, even if profits are reported in lower-tax countries.

Projected Corporate Tax Rates–including 2026

In the Autumn Budget 2024, the UK government introduced a roadmap to provide certainty to businesses. Under this roadmap, the Corporate Tax structure, including the 19% and 25% rates and the thresholds for marginal relief will remain unchanged through to April 2026 and beyond.

While the rates themselves are fixed, HMRC’s enforcement approach continues to evolve. The introduction of the Uncertain Tax Treatment regime means large companies must now notify HMRC of any tax positions that could be disputed. This shift shows HMRC’s growing focus on governance and transparency.

Corporate Tax filing and payment deadlines in the UK

Companies must submit their Company Tax Return no later than twelve months after the end of their accounting period. Failure to file on time may result in penalties. Meanwhile, the deadline for paying the Corporation Tax due is generally nine months and one day after the end of the accounting period. If your accounting period extends beyond twelve months, creating two tax periods – you will have two corresponding payment deadlines. Larger companies often pay their liability through the Quarterly Instalment Regime.

Businesses must also prepare for the continued digitalisation of tax compliance. While formal Making Tax Digital requirements for Corporation Tax have been withdrawn, HMRC continues to promote the use of digital tools for maintaining records, submitting returns, and ensuring audit transparency. Larger businesses in particular are expected to maintain robust, traceable systems that support real-time data access and streamlined compliance processes. As the tax landscape becomes more data-driven, the role of cloud-based software and digital integration is increasingly vital.

Getting expert help with Corporation Tax in the UK

Understanding and complying with Corporation Tax in the UK has never been more complex, from evolving reliefs and international rules to heightened scrutiny and digitalisation. Whether you’re managing a growing business or part of a multinational group, tailored Corporation Tax advice can make a substantial difference. If you’d like to speak to one of our Corporate Tax specialists, get in touch with us today.