Corporation Tax

Corporation Tax is the primary tax levied on the profits of UK-resident companies, as well as non-UK companies that carry on a trade through a permanent establishment in the United Kingdom. Unlike Income Tax, Corporation Tax is not deducted at source — companies must calculate their own liability and report it to HMRC via the CT600 return. The rate you pay depends on the level of your company's profits, and the rules surrounding payment deadlines can be complex, particularly for large businesses subject to quarterly instalments.

Main Rate and Small Profits Rate

From 1 April 2023, the Corporation Tax main rate increased to 25% for companies with profits above £250,000. A small profits rate of 19% applies to companies with profits of £50,000 or less. For companies with profits between £50,000 and £250,000, marginal relief applies, which gradually increases the effective rate from 19% to 25%. These thresholds are divided by the number of associated companies in the group, meaning a group of four companies would have a small profits threshold of just £12,500 each. Profits for these purposes means augmented profits — your taxable total profits plus franked investment income (excluding group dividends). If your company is close to the thresholds, careful planning with associated companies and profit extraction strategies can make a significant difference to your overall tax bill.

Paying Corporation Tax

Corporation Tax is due nine months and one day after the end of your company's accounting period. For a company with a 31 December year-end, payment is due by 1 October. The CT600 return must be filed within twelve months of the end of the accounting period. Payment can be made via Faster Payments, CHAPS, Bacs, debit card, or direct debit through HMRC's online portal. Interest is charged on late-paid tax at the Bank of England base rate plus 2.5%, while HMRC pays interest on overpaid tax at the base rate minus 1% (with a 0% floor).

Quarterly Instalment Payments

Large companies — those whose profits exceed £1.5 million in a twelve-month period — must pay their Corporation Tax in four quarterly instalments. The first instalment is due six months and 13 days after the start of the accounting period, with the remaining three at three-monthly intervals. The £1.5 million threshold is also divided by the number of associated companies. Very large companies (profits over £20 million) pay in instalments starting from month two. Failure to pay the correct instalment on time attracts an automatic penalty calculated using a prescribed formula.

The CT600 Return

Every company must file a CT600 return for each accounting period, even if it has no tax to pay. The CT600 captures the company's income, chargeable gains, deductions and reliefs, and the resulting tax liability. Supplementary pages may be required for loan relationships, derivative contracts, intellectual property, and group relief. Returns are filed online through commercial software or HMRC's own filing service. You must also file the company's statutory accounts with the CT600, although these can be abbreviated for small companies. Filing late incurs automatic penalties: £100 if one day late, rising to £1,000-plus for longer delays, with additional tax-geared penalties in serious cases.

Planning and Compliance

To minimise your Corporation Tax exposure, consider claiming all available reliefs: Capital Allowances (including the Annual Investment Allowance), R&D Tax Relief, the Patent Box regime, and Creative Industry Reliefs if applicable. Also review your group structure for associated company implications. Keep full accounting records for at least six years after the end of the accounting period — HMRC can open an enquiry into any return within twelve months of filing.

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