How Much Corporation Tax Does a Limited Company Pay in 2026?

UK limited companies pay Corporation Tax at 19% on profits up to £50,000 and 25% on profits above £250,000, with Marginal Relief tapering the rate between those bands. Those headline figures are straightforward enough. What catches directors out is everything around them: associated company rules, augmented profits, quarterly instalment obligations, and reliefs that go unclaimed because nobody flagged them before the year-end.

Do Limited Companies Have to Pay Corporation Tax?

Yes. If your company is incorporated in the UK, it pays Corporation Tax on trading profits, investment income and chargeable gains from the date it becomes active, not simply from the date it is registered.

Companies House tells HMRC when you incorporate, but you still need to confirm separately that the company has started trading within three months.

Your company must file a Company Tax Return, known as a CT600, for every accounting period. That still applies if the company made a loss or had no Corporation Tax to pay. Zero-profit years are not an automatic exception.

Corporation Tax Rates for Limited Companies

For the year ending 31 March 2026 and the current financial year, limited company Corporation Tax rates are:

• Small profits rate: 19% on profits up to £50,000
• Main rate: 25% on profits above £250,000

If your profits fall between £50,001 and £250,000, Marginal Relief applies. That means your effective rate gradually increases through the band rather than jumping straight from 19% to 25%.

The current two-rate system started on 1 April 2023 under CTA 2010 as amended. It replaced the old flat 19% Corporation Tax rate.

The £50,000 and £250,000 thresholds are reduced if your company has associated companies. The limits are divided by the number of associated companies plus one. So if your company has two associated companies, the thresholds are divided by three, leaving limits of around £16,667 and £83,333.

Close investment-holding companies, meaning companies mainly set up to hold investments rather than trade, cannot use the small profits rate. They pay the 25% main rate even when profits are low. Most standard trading limited companies will not be affected by this rule.

Who Pays 25% Corporation Tax?

A limited company with profits above £250,000 pays Corporation Tax at the full 25% main rate, with no tapering. But that £250,000 limit is not fixed for every company.

If your company has one associated company, the upper threshold falls to £125,000. With more associated companies, it drops further.

Associated companies are companies under common control. It does not matter whether the other company is dormant or loss-making. If you control both, HMRC still counts them. This is one of the most common places limited company Corporation Tax calculations go wrong, so it is worth checking before assuming which rate applies.

Corporation Tax Thresholds and Marginal Relief Explained

Marginal Relief uses a standard fraction of 3/200. In plain English, the formula starts with tax at the main 25% rate, then reduces it based on how far your profits sit below the upper threshold.

Example calculation

There is no nil-rate band for Corporation Tax. If a company makes £1 of taxable profit, Corporation Tax is due at 19%.

One detail that catches directors out: augmented profits, not just trading profits, decide which band you sit in. Augmented profits include dividends received from non-group companies. If your trading profits are £45,000 but the company receives £10,000 in dividends from a non-group company, augmented profits become £55,000, pushing you into the Marginal Relief band.

What Counts as Profit for Corporation Tax?

HMRC taxes your profit after allowable business expenses, capital allowances and relevant reliefs have been deducted from gross income.

Allowable expenses must be incurred wholly and exclusively for business purposes. Common deductions include staff salaries, employer pension contributions, rent and professional fees.

Capital allowances are used instead of accounting depreciation for tax purposes. The Annual Investment Allowance lets companies deduct 100% of qualifying plant and machinery purchases up to £1 million a year.

Chargeable gains matter too. If your company sells assets such as property, equipment or investments at a profit, those gains are added to trading profits for Corporation Tax purposes.

Dividends paid to shareholders do not count as a business expense. They are distributions of post-tax profit and do not reduce the company's Corporation Tax bill.

Losses from previous periods can usually be carried forward and used against future profits from the same trade. In some cases, losses can also be carried back to reclaim Corporation Tax already paid.

How Much Tax Does a Limited Company Actually Pay in Total?

The company pays Corporation Tax on its profits before you personally take money out. What you owe as an individual depends on how you extract those funds.

Director salary is an allowable business expense that reduces taxable profit, but it can trigger National Insurance. Dividends are paid from post-tax profits and taxed in the shareholder's hands at 8.75%, 33.75% or 39.35% depending on the tax band, with a £500 dividend allowance. Dividends do not attract National Insurance, which is why they are often more tax-efficient than salary above the NI threshold.

Here is a worked example for a company making £100,000 profit:

These figures are approximate and assume no other income and 2025/26 tax bands.

Corporation Tax Payment Deadlines and Filing Requirements

There are two key Corporation Tax deadlines, and they are not the same:

• Payment deadline: 9 months and 1 day after the end of your accounting period. For a 31 March year-end, that means 1 January.
• CT600 filing deadline: 12 months after the accounting period ends.

Large companies with profits above £1.5 million pay by quarterly instalments. Late payment leads to interest at the Bank of England base rate plus 2.5 percentage points. A CT600 filed up to three months late brings a £100 penalty, with a second £100 penalty after three months and up to 10% of unpaid tax if the return is more than 12 months late.

Dormant companies are generally exempt from filing, but you still need to tell HMRC the company is dormant.

How to Reduce Your Corporation Tax Bill

Getting the deadlines right is only half the job. The other half is making sure you are not paying more than you need to.

The key is to claim what is properly available and plan before the year-end. The most impactful starting points are employer pension contributions, which are fully deductible and attract no National Insurance, the Annual Investment Allowance for qualifying equipment, and making sure commonly missed expenses such as home working costs and mileage are claimed.

For a full breakdown, see our guide to reducing your Corporation Tax bill.

Let TurnerBerry Handle Your Corporation Tax

Corporation Tax for a limited company involves more moving parts than most directors expect. TurnerBerry works with limited companies across Bristol, Cardiff, the South West and Wales to make sure the right rate is applied, available reliefs are claimed, and the CT600 is filed on time.

Book a consultation or find out more about our Corporation Tax service.