If you run a limited company in the UK, corporation tax is one of those things you cannot afford to get wrong. Yet so many business owners either overpay because they missed a relief, underpay because they miscalculated, or simply file late because the rules changed and nobody told them. The stress of not knowing exactly what you owe — and when — is something thousands of limited company directors deal with every year. This blog breaks it all down in plain English so you know exactly where you stand.
What Is Corporation Tax?
Corporation tax is simply a tax on the money your limited company makes as profit. Most people know about income tax — that is what you pay personally. But corporation tax for limited companies is a separate thing entirely. Your company pays it on its own profits, and every UK limited company has to deal with it regardless of size.
What catches many directors off guard is that HMRC will not chase you with a reminder. You have to work it out yourself, file your Company Tax Return on time, and make sure the payment lands before the deadline. Slip up on any of these and HMRC moves quickly — penalties, interest charges, and sometimes a closer look at your accounts.
Current Corporation Tax Rates
This is where things have changed significantly in recent years. Gone are the days of a single flat rate for everyone.
The current corporation tax rates for 2026 are:
Small Profits Rate — 19% — applies to companies with profits up to £50,000
Main Rate — 25% — applies to companies with profits over £250,000
Marginal Relief — for companies with profits between £50,000 and £250,000, you pay somewhere between 19% and 25% depending on your exact profit figure
This marginal relief zone catches a lot of small business owners off guard. If your profits sit between those two thresholds, your effective tax rate is not a straight 19% or 25% — it is calculated using a specific HMRC formula. Most business owners in this band end up paying an effective rate of around 26.5% on the profits that fall within the marginal zone.
When Do You Pay Corporation Tax?
Deadlines matter. Here is what you need to know:
Your Company Tax Return (CT600) must be filed within 12 months of your accounting period end
Your corporation tax payment is due 9 months and 1 day after your accounting period ends
So if your year ends 31 March, your payment is due 1 January the following year
Miss the payment deadline, and HMRC charges interest from day one. Miss the filing deadline and automatic penalties kick in — starting at £100 and rising the longer you leave it.
What Counts as Taxable Profit?
Not everything your company earns is taxed at face value. Your taxable profit is your income minus allowable expenses. Some of the most commonly missed deductions include:
Director's salary and pension contributions — properly structured, these can significantly reduce your taxable profit.
Business expenses — office costs, travel, equipment, software subscriptions, professional fees — all allowable if genuinely for business use.
Capital allowances — if you buy equipment or machinery, you can often deduct the full cost in year one through the Annual Investment Allowance (AIA), which currently stands at £1 million.
R&D Tax Credits — if your company does any kind of innovation or development work, you may qualify for relief that reduces your tax bill significantly.
Missing even one of these can mean paying far more corporation tax than you legally need to.
Common Mistakes Limited Companies Make
A lot of directors make the same avoidable errors:
Forgetting to register for corporation tax within 3 months of starting to trade
Mixing personal and business expenses, which creates messy accounts and potential HMRC scrutiny
Not claiming all available reliefs and allowances
Leaving the tax return to the last minute, which increases errors
Not setting money aside throughout the year, leading to a cash flow crisis when the bill arrives
FAQs
How much corporation tax do I pay if my company made £80,000 profit?
At £80,000 profit, you fall into the marginal relief band — meaning your rate sits somewhere between 19% and 25%. The exact amount depends on your specific circumstances, available reliefs, and allowable expenses. An accountant can work out the precise figure and make sure you are not paying more than you need to.
When do I need to register my limited company for corporation tax?
You must register with HMRC for corporation tax within 3 months of starting to trade. HMRC will not always remind you — the responsibility is yours. Late registration can result in penalties, so it is one of the first things to sort after incorporating.
Can I reduce my corporation tax bill legally?
Yes — and this is one of the biggest advantages of working with a professional accountant. Pension contributions, salary structuring, capital allowances, R&D credits, and timing of expenses are all legitimate ways to reduce your liability. Many limited company directors overpay simply because they are not aware of what they can claim.
You Should Not Have to Figure This Out Alone
Corporation tax sounds straightforward until you are sitting in front of a blank CT600, unsure whether you have claimed everything you are entitled to, worried about whether your figures are right, and watching the deadline creep closer. That is a stressful place to be — and it is completely avoidable.
At Malik AccounTax, we specialise in helping limited companies across Edinburgh and the UK take the confusion out of corporation tax. From calculating your exact liability and identifying every relief you qualify for, to filing your CT600 and corresponding with HMRC on your behalf — we handle it all. Fixed fees, no surprises, and a team that actually explains things in plain English.
If you are unsure what you owe, behind on your filing, or just want to make sure you are not overpaying, get in touch today.
Call Us: +44 787 9720675
Email: info@malikaccountax.com
Stop guessing what you owe — let Malik AccounTax handle it for you.