Limited companies and some organisations must pay Corporation Tax on their profits. You must register for Corporation Tax when you start doing business or restart a dormant company.

Main rate: 25% (profits over £250,000)
Small profits rate: 19% (profits up to £50,000)
Marginal relief: Available for profits between £50,000 and £250,000
Payment deadline: 9 months and 1 day after accounting period ends

HMRC registration checklist

Key HMRC registration deadlines by business type.

Self Assessment (sole traders/partnerships): Register by 5 October after your first tax year
Corporation Tax (limited companies): Register within 3 months of starting to trade
VAT registration threshold: £90,000 turnover in 12 months (mandatory)
PAYE (employers): Register before first payday
CIS (construction): Register before first payment to subcontractors

Register within 3 months

Tell HMRC when your company starts trading or becomes active.
File your Company Tax Return

Submit CT600 within 12 months of accounting period end.
Pay on time

Pay Corporation Tax 9 months and 1 day after your accounting period.

THRESHOLD £50,000

profit threshold: £50,000

Corporation Tax rates are tiered based on your annual profits. Companies with profits up to £50,000 pay 19%, while those over £250,000 pay 25%.

Above threshold:

Profits £50,000-£250,000 qualify for marginal relief. Over £250,000 pays 25%.

Below threshold:

You pay 19% Corporation Tax with no marginal relief calculation needed.

Corporation Tax marginal relief calculation

How marginal relief works for profits between £50,000 and £250,000, including the 3/200 formula from Finance Act 2022.

Corporation Tax rate structure since April 2023:

Small profits rate (19%): Profits up to £50,000
Main rate (25%): Profits over £250,000
Marginal relief: Tapered rate for profits between £50,000 and £250,000

The marginal relief zone smooths the transition from 19% to 25%, with the effective tax rate increasing gradually as profits rise through the £50,000-£250,000 range.

Small profits rate: 19% (profits up to £50,000)
Main rate: 25% (profits over £250,000)
Marginal relief zone: £50,000 to £250,000 (tapered effective rate 19%-25%)
Marginal relief fraction: 3/200 (0.015 or 1.5%)
Standard formula: MR = 3/200 × (Upper Limit - Profits) × (Profits / Profits)
Upper limit: £250,000 (adjusted for associated companies and short periods)
Associated companies rule: Thresholds divided equally between associated companies (e.g., 2 companies = £25,000 small profits threshold each)

Marginal relief formula

The statutory marginal relief formula from Finance Act 2022 is:

Marginal Relief = 3/200 × (Upper Limit - Taxable Profits) × (Taxable Total Profits / Augmented Profits)

For most companies without distributions or associated companies, this simplifies to:

MR = 3/200 × (£250,000 - Profits)

Worked examples

Example 1: £150,000 profit (midpoint)

Tax at main rate: £150,000 × 25% = £37,500
Marginal relief: 3/200 × (£250,000 - £150,000) = 3/200 × £100,000 = £1,500
Tax payable: £37,500 - £1,500 = £36,000
Effective rate: 24%

Example 2: £100,000 profit

Tax at main rate: £100,000 × 25% = £25,000
Marginal relief: 3/200 × (£250,000 - £100,000) = 3/200 × £150,000 = £2,250
Tax payable: £25,000 - £2,250 = £22,750
Effective rate: 22.75%

Corporation Tax rates and marginal relief

Company accounts and audit requirements

Beyond Corporation Tax, limited companies must file annual accounts with Companies House and may require a statutory audit depending on size.

Audit exemption for small companies

Criteria for exemption from statutory audit requirement for small companies.

Annual turnover threshold: £15 million or less (from 6 April 2025)
Balance sheet total threshold: £7.5 million or less (from 6 April 2025)
Qualification rule: Must meet both thresholds above
Previous thresholds (before 6 April 2025): £10.2 million turnover and £5.1 million balance sheet
Exceptions (always require audit): Public companies, financial services firms, subsidiaries of audited groups

Most small companies are exempt from audit. Directors must include a statement on the balance sheet confirming exemption eligibility and that members have not required an audit.

Small company accounts thresholds 2025/26

Thresholds for filing abbreviated small company accounts with Companies House from 6 April 2025.

Annual turnover threshold: £15 million or less (increased from £10.2 million)
Balance sheet total threshold: £7.5 million or less (increased from £5.1 million)
Average employees threshold: 50 or fewer (unchanged)
Qualification rule: Must meet 2 of the 3 thresholds above
Consecutive years required: 2 years (unless first year)
Effective date: Financial years starting on or after 6 April 2025
Previous thresholds (before 6 April 2025): £10.2 million turnover / £5.1 million balance sheet / 50 employees

Small companies can file abbreviated accounts without a profit and loss statement. Must qualify as small for 2 consecutive years before filing in this format.

Corporation Tax quarterly instalment payment schedule

Quarterly instalment requirements for large companies (profits over £1.5 million).

Large companies must pay Corporation Tax in quarterly instalments rather than in one lump sum. This significantly affects cash flow planning and is often missed by growing businesses crossing the £1.5m threshold for the first time.

Threshold for quarterly instalments: £1.5 million annual profits
Associated companies rule: £1.5m threshold divided equally (e.g., 2 associated companies = £750,000 threshold each)
Very large companies threshold: Profits over £20 million (earlier payment schedule applies)
Amount per instalment: 25% of estimated annual Corporation Tax liability

Payment schedule for £1.5m-£20m profits

Companies with profits between £1.5 million and £20 million must pay Corporation Tax in quarterly instalments on the following schedule:

Instalment 1: Month 7 of accounting period (14 days after end of month 6)
Instalment 2: Month 10 (14 days after end of month 9)
Instalment 3: Month 13 (1 month and 14 days after period end)
Instalment 4: Month 16 (4 months and 14 days after period end)

Example: Company with December year-end and £2m profit

Estimated Corporation Tax: £2m × 25% = £500,000
Per instalment: £500,000 ÷ 4 = £125,000
Instalment 1: 14 July (while still trading - 6 months before year-end)
Instalment 2: 14 October
Instalment 3: 14 February (after year-end)
Instalment 4: 14 May

Cash flow impact: You pay significant Corporation Tax before the accounting period ends - when cash may be tied up in stock, debtors, or reinvested in growth.

Very large companies (over £20m profits)

Companies with profits over £20 million must pay instalments even earlier - starting in month 7 of the accounting period (compared to month 14 for companies in the £1.5m-£20m bracket).

Important: You must estimate profits accurately. HMRC charges interest if you underpay instalments. Missing instalments triggers automatic interest charges (even if unintentional).

Corporation Tax quarterly instalment payments

R&D tax credits

Companies investing in research and development can claim significant tax relief. The merged scheme introduced in April 2024 simplifies the system.

R&D tax credits eligibility

Tax relief for companies investing in research and development. Pure data reference.

Merged scheme rate: 20% above-the-line credit (15% after 25% Corporation Tax)
R&D intensive SMEs (ERIS): 27% tax credit for loss-making SMEs spending 30%+ on R&D
SME definition: Under 500 employees and turnover below €100m
Applies from: Accounting periods starting on or after 1 April 2024

R&D tax relief

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Corporation Tax basics

Register within 3 months

File your Company Tax Return

Pay on time

Small profits rate: 19% Corporation Tax

Above threshold:

Below threshold:

Company accounts and audit requirements

R&D tax credits

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Register within 3 months

File your Company Tax Return

Pay on time

Small profits rate: 19% Corporation Tax

Above threshold:

Below threshold:

Company accounts and audit requirements

R&D tax credits

Related guides in Tax & Finance

Business Context Testing

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