What is Corporation Tax?

27 September 2023

By Adam Parry

No one on earth likes tax, yet we all must pay them. Even your business. This article gives you an overview of corporation tax.

What is Corporation Tax?

The simple answer is that Corporation Tax is the tax that a limited company must pay on both their profits and their gains from selling assets that have increased in value.

How much is Corporation tax?

As of April 1st 2023, corporation tax has increased to 25% from the former 19% rate. It should be noted that corporation tax rate is constantly changing year on year. Since 2000 the corporation tax rate has changed eight times, some changes being increases in the tax rate and some being more favourable decreases in the corporation tax rate.

What is the Small Profits rate and how does it work?

On the 1st April 2023 the government introduced a Small Profit rate. This is available when your taxable profits are below £50K. This means that for companies that have taxable profits of £50K and below they are then able to pay corporation tax at 19% instead of the new 25%.

What is the Main rate?

The main rate is the rate that applies to companies that have taxable profits of £250k and above. When a company is earning over £250K then their tax rate is increased to the main rate of 25% as of 1st April 2023.

What if my company has profits between £50K and £250K?

If your company has profits between the margin or £50K and £250K profits than your corporation tax is subject to Marginal rate relief. This means for any companies with profit between £50K and £250K they shall pay the higher rate of 25%, however this will be reduced by marginal rate relief which is calculated depending on your profits. The relief is on a sliding scale, the higher your profits are to £250K the smaller your marginal rate relief.

When must I pay my corporation tax?

Your corporation tax will always be due 9 months and 1 days after the end of your accounting period. For example, if your accounting period ends 31st December 2022, your corporation tax will be due by 1st October 2023. A useful tool to calculate your corporation tax will be due is a date calculator like this one, Date Calculator. You will need to submit a CT600 tax return, this is where you calculate and report your corporation tax for HMRC. You must submit your CT600 to HMRC 12 months after your accounting period has ended. To find out more please see preparing for your first filing period

What if my company is based in the UK but operates abroad?

If your company is based in the UK (its registered address is in the UK) then it must pay Corporation Tax on all of its profits made both in the UK and abroad.

If you wish to find out how to file your corporation tax than you should read How to File a CT600 Online.

Author: Adam Parry

Adam is one of our Digital Accountants specialising in Small and Micro Accounting and Corporation Tax. He holds a First-class Degree in Accounting and Finance and is a key member of our Front of House team, delivering exceptional customer service. Adam also contributes to our knowledge base and in his spare time enjoys the ski slopes of Austria, dining out and pursuing his interest in classic cars.

Read All articles by Adam Parry

This article is information only and has been prepared for general guidance on matters of interest only, and does not constitute legal, accounting, tax, investment or other professional advice or services. You should not act upon the information contained in this article without obtaining specific professional or legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this article, and, to the extent permitted by law, Comdal Limited, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.