Corporation Tax for Small Limited Companies — UK Guide 2026
Corporation Tax (CT) is charged on the profits of UK limited companies. Since April 2023 the rate you pay depends on the size of your profits, with a small profits rate of 19% and a main rate of 25% — and a marginal relief band in between. This guide explains exactly what applies to your company in the 2026 tax year.
Corporation Tax Rates for 2026
The rates that applied from 1 April 2023 remain in force for financial years 2024 and 2025 (covering most accounting periods ending in 2025 and 2026). There are two main rates plus a marginal relief taper:
| Taxable Profits | Rate | Notes |
|---|---|---|
| Up to £50,000 | 19% (Small Profits Rate) | Full small profits rate applies |
| £50,001 – £250,000 | 19% – 25% (Marginal Relief) | Effective rate tapers upward |
| Over £250,000 | 25% (Main Rate) | Full main rate applies |
Marginal Relief Explained
Marginal Relief smooths the transition between 19% and 25% so there is no sudden jump. HMRC calculates it using this formula:
Marginal Relief = (Upper Limit – Augmented Profits) × (Standard Fraction) × (Profits / Augmented Profits)
The standard fraction is 3/200 for financial years 2023, 2024 and 2025. In practice, the effective marginal rate on profits between £50,000 and £250,000 works out at 26.5% — slightly above the main rate. This is important when planning director salary and dividends, as profits just above £50,000 carry a higher marginal tax cost than profits above £250,000.
HMRC provides a free Marginal Relief Calculator on GOV.UK. Use it to work out your exact liability before filing.
What Counts as Taxable Profit?
Corporation Tax is charged on your company's taxable profits, which include:
- Trading profits (turnover minus allowable business expenses)
- Investment income (interest, rental income from property held by the company)
- Chargeable gains (profit on sale of capital assets, e.g. property or shares)
Losses from previous periods can normally be carried forward and offset against future profits of the same trade, reducing your CT liability in profitable years.
Allowable Deductions
You can deduct any expense that is incurred wholly and exclusively for the purposes of the business. Common allowable deductions include:
- Staff salaries, employer National Insurance and pension contributions
- Rent, rates, utilities and insurance for business premises
- Office supplies, software subscriptions and professional services
- Bank charges and loan interest on business borrowings
- Advertising, marketing and website costs
- Travel and subsistence (business journeys only — not commuting)
- Accountancy and legal fees
- Capital allowances on equipment, machinery and vehicles (see below)
Capital Allowances
Rather than deducting the full cost of capital assets in one go, you claim capital allowances. The key reliefs for small companies are:
| Relief | Rate / Limit | Applies to |
|---|---|---|
| Annual Investment Allowance (AIA) | 100% up to £1 million per year | Most plant, machinery and equipment |
| Full Expensing | 100% first year (main pool) or 50% (special rate pool) | New qualifying plant and machinery (incorporated companies only) |
| Writing Down Allowance (WDA) — Main Pool | 18% per year (reducing balance) | Assets not covered by AIA/Full Expensing |
| WDA — Special Rate Pool | 6% per year | Integral features, long-life assets |
Filing Your Corporation Tax Return (CT600)
Every UK limited company must file a CT600 Company Tax Return with HMRC, even if it makes a loss or owes no tax. The CT600 must be filed online via HMRC's Corporation Tax service or compatible accountancy software.
Key Deadlines
| Obligation | Deadline |
|---|---|
| Pay Corporation Tax owed | 9 months and 1 day after the end of your accounting period |
| File CT600 and accounts with HMRC | 12 months after the end of your accounting period |
| File accounts with Companies House | 9 months after the end of your accounting period (for private companies) |
Large Companies — Quarterly Instalment Payments
Companies with annual taxable profits exceeding £1.5 million must pay CT in quarterly instalments rather than waiting until 9 months after the year end. This threshold is also divided by the number of associated companies. Most small owner-managed limited companies fall well below this level and pay in a single lump sum.
Registering for Corporation Tax
You must register your new company for Corporation Tax with HMRC within 3 months of starting to trade. Registration is done online via your Government Gateway account. HMRC will then issue your company's Unique Taxpayer Reference (UTR), which you need to file returns and make payments.
If you form your company through Companies House, HMRC is automatically notified and will usually send a UTR within a few weeks — but it is your responsibility to ensure registration is complete before the 3-month deadline.
R&D Tax Relief for Small Companies
If your company carries out qualifying research and development, you may be able to claim R&D Tax Relief to reduce your CT bill or receive a payable credit. From April 2024, most small and medium-sized companies use the merged R&D Expenditure Credit (RDEC) scheme at a 20% rate, giving an effective post-tax benefit of around 15p per pound of qualifying R&D expenditure. Loss-making SMEs may qualify for the enhanced SME scheme if they are R&D-intensive. See our R&D Tax Credits guide for full details.
Practical Tips for Minimising Your CT Bill Legally
- Maximise pension contributions: Employer pension contributions are fully deductible and reduce taxable profits. There is no annual limit on what the company can pay into a director's pension (subject to the pension Annual Allowance rules).
- Time capital expenditure: Purchasing equipment just before your year end means you claim the AIA or Full Expensing relief in the current year, reducing that year's CT bill.
- Claim all allowable expenses: Keep thorough records. Many small company directors miss legitimate deductions such as the use-of-home-as-office charge, training costs and professional subscriptions.
- Consider the marginal relief band: If profits are just above £50,000, the effective rate is 26.5% on those marginal pounds. Pension contributions or other deductible expenditure that brings profits back below £50,000 can save tax at that higher marginal rate.
- Use losses efficiently: Trading losses can be carried back one year (or carried forward indefinitely) to offset against CT, and may be available for group relief if you have associated companies.