Corporation tax: what you need to know

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Maybe you have been wondering how small and large corporations pay taxes to the government. Or you recently started your own limited company in the UK and you are wondering how you will pay tax. You may have even gotten a notice of late filing from HMRC and you are wondering how that could be. Look no further. This article will enlighten you on all things you need to know about corporation tax and how the UK government calculates the amount due for each company.

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Answer Adeosun
Jul 25, 22 · 6 min read
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What is corporation tax?

Corporation tax is the tax paid on the profits and any gains or revenues on the sale of assets by small and large limited liability companies, foreign companies with branches in the UK, associations, clubs, or cooperatives.

The profits from a taxable year are what remains in your company’s finance after all expenses in wages and salaries, loan payments, dividends, capital expenses, etc., have been duly deducted. It is the 19% of such remainder that will be paid as corporation tax.

It is important to know that corporation tax is not like any other utility bill where you get reminders in your mail. You need to know when it is due and how much you are supposed to pay. You should also file the tax payment in time to avoid being penalised by the government.

What this simply means is that you are solely responsible for making sure all your ducks are in a row where the payment of corporation tax is concerned.

Who has to pay corporation tax?

As mentioned earlier, all companies incorporated in the UK, no matter the business structure, must pay corporation tax on all profits made. Companies not headquartered in the UK but with branches in the UK must also pay corporation tax on profits of sales made in the UK. Clubs, cooperatives, and associations are also required to pay corporation tax.

Note that, sole traders and business partnerships don’t pay corporation tax. Rather, they fill out a Self-Assessment form with the HMRC to pay income tax on their profits.

Also, it is only companies operating in the UK that need to pay corporation tax. As such, if your company has a global reach, it is only the revenues made by your company located in the UK that you are to pay tax on.

What is a taxable year?

A taxable year, according to HMRC, is the first of the month in which your company started business to the end of the preceding month of another year. For instance if your company stated business June 1, 2022, the taxable year ends May 31st, 2023. You are expected to pay your corporation tax on or before 9 months after the taxable year has ended, otherwise you will be penalised.

How to register for corporation tax?

Every company, club, association, or cooperative incorporated in the UK must have registered to pay corporation tax while registering with the Companies House.

However, per adventure you opted not to do that, you still have the option of doing it separately with the HMRC’s website at website. Details you'll be asked to fill in include:

  • Company name
  • Registration number
  • Your business start date (the start date of your company's accounting period)
  • The main address
  • Type of business
  • Name and home addresses of the directors

When does corporation tax have to be paid?

You should pay the company’s corporation tax on or before 12 months after the relevant tax year. What do we mean by this? If your company started business on July 1, 2022, the year ends June 30, 2023. So, your corporation tax for that year must be paid and your company tax return filled with the HMRC before June 30, 2024.

If you find it difficult to do this yourself, you should consider seeking the assistance of a tax or financial accountant to make sure your taxes are duly paid.

How do you calculate your corporation tax?

You can get your corporation tax calculated by visiting the HMRC website. However, you should know that as of April 2021 all limited liability companies are to pay 19% of the profits made as corporation tax.

This has been scheduled to change by April 1, 2023, based on the Spring Budget meeting held in 2021. By that time, companies with profits above £250,000 are to pay 25% of their profits as corporation tax. The 19% rate will apply to companies not earning more than £50,000 in profits whereas those that earn between £50,000 to £250,000 can claim Marginal Relief on their taxes paid.

Also, note that this tax rate does not include the ring-fence companies. These are companies that deal in oil exploration and extraction in the UK.

Is it possible to reduce the corporation tax bill?

As mentioned earlier, you can claim corporation tax relief since you are qualified for them. Below is a list of some of the reliefs you can claim on your corporation tax.

  • Marginal Relief – this can be claimed if your company’s profits were between £300,000 and £1.5 million before April 1, 2015, or from oil extractions or rights on the UK continental shelves or in the UK itself.
  • Benefit Relief – Also, you can deduct the cost of running the business and what you pay your employees from the profits made in the financial year before you pay your tax on it. This is called benefit relief.
  • Capital Relief – This is the amount you used to buy capital assets for your business like types of machinery, vehicles, and any equipment that is being used by your company.
  • Other Reliefs – include Research and Development relief (R&D), Creative Industry Relief (CITR), Patent Box relief, trading losses, terminal capital and property income losses, disincorporation relief, and relief on goodwill


The corporation tax payment in the UK can be tricky in such a way that calculating what you are meant to pay may be tedious. So, get the help of a tax accountant today and get tax relief.

How to pay corporation tax?

After you must have duly calculated how much your corporation tax is, proceed to the HMRC’s website and provide your login details
HowTo step image

1. You can choose to pay on the same day

Through online or telephone banking (Faster Payments) or your bank account

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