As a small business owner in the UK, understanding your Corporation Tax obligations is crucial to staying compliant and managing your finances effectively. With changes to the UK tax system in recent years and new thresholds coming into effect, it’s more important than ever to stay informed.
Here’s a guide to corporation tax for small businesses:
What is Corporation Tax?
Corporation Tax is the tax that limited companies pay on their profits. In the UK, it applies to:
- Trading profits
- Investments
- Chargeable gains (from selling assets for more than they cost)
Corporation Tax Rates in 2025
As of April 2023, Corporation Tax rates changed depending on profit levels, and these rates continue into 2025:
- 19% for companies with profits of £50,000 or less (small profit rate)
- 25% for companies with profits over £250,000 (main rate)
- A marginal relief applies for companies with profits between £50,000 and £250,000, providing a gradual increase in the effective rate.
These thresholds are not new in 2025 but continue to apply. It’s essential to calculate your profits accurately to determine the correct rate and avoid penalties.
Who Pays Corporation Tax?
Only limited companies pay Corporation Tax. If you’re self-employed or in a partnership, you pay Income Tax instead. However, if you’ve recently incorporated your business, you need to register for Corporation Tax within three months of starting to trade.
When Do You Pay Corporation Tax?
Corporation Tax is due nine months and one day after the end of your accounting period. For example, if your year-end is 31 March 2025, your Corporation Tax bill is due by 1 January 2026.
Filing Your Company Tax Return
You must file a Company Tax Return (CT600) every year, usually alongside your annual accounts, with HMRC. Deadlines are:
- Filing: 12 months after the end of your accounting period
- Payment: 9 months and 1 day after your accounting period ends
Failure to submit on time can result in automatic penalties starting at £100.
What Expenses Can You Deduct?
To reduce your taxable profit, you can deduct allowable business expenses. These include:
- Salaries and wages
- Rent, rates, and utilities
- Professional fees (e.g. accountants)
- Office supplies
- Marketing costs
Keeping accurate records is essential to back up your claims.
Why Use a Bookkeeper or Accountant like us?
Corporation Tax can be complex, especially when considering reliefs, allowances, and ensuring full compliance. Working with a professional like us, ensures:
- Accurate profit reporting
- Timely submissions to HMRC
- Proper use of available allowances and reliefs
- Peace of mind knowing you’re compliant
Our expert team can take the hassle out of your Corporation Tax obligations. Whether you’re new to limited company trading or need help managing your growing business, we offer a free consultation to get you started.
Corporation Tax is an essential part of running a limited company in the UK. With 2025 continuing the tiered tax rate system, understanding where your business stands is more important than ever.
We hope you found our guide to corporation tax for small businesses helpful and for further advice, expert support, and professional bookkeeping, get in touch with us today.