What is corporation tax?
Corporation tax is the tax a company pays on its taxable profits, worked out from its accounting profit with adjustments set by tax law. In the UK it is charged on limited companies, foreign companies with a UK branch and some associations, reported on the CT600 company tax return. In the US the equivalent is the federal corporate income tax.
Also calledcorporate income taxcompany taxCT600
Compare the softwareBest cloud accounting software →All 9 tax and compliance vendors →
- UK main rate
- 25% on profits over £250,000
- UK small profits rate
- 19% up to £50,000
- US federal rate
- 21%
How corporation tax works
Taxable profit starts from the profit in the accounts. Items the tax rules treat differently are adjusted: accounting depreciation is added back and capital allowances deducted, some entertaining costs are disallowed, and reliefs such as research and development relief reduce the profit. In the UK, since 1 April 2023 the main rate is 25% for profits over £250,000, the small profits rate is 19% for profits of £50,000 or less, and marginal relief applies in between. Payment is usually due 9 months and one day after the end of the accounting period, and the return is due 12 months after it; large companies pay in quarterly instalments. In the US, C corporations pay federal income tax at 21% and file Form 1120, generally by the 15th day of the fourth month after year end, with state taxes on top. Accountants prepare returns in tax software from the year-end accounts.
Common questions
When is UK corporation tax due?+
For most companies, payment is due 9 months and one day after the end of the accounting period, and the company tax return is due 12 months after it. Large companies pay by quarterly instalments.
What is marginal relief?+
A UK relief for companies with profits between £50,000 and £250,000, which phases the rate up gradually from the 19% small profits rate to the 25% main rate.
Is corporation tax charged on turnover?+
No. It is charged on taxable profit: income less allowable costs, capital allowances and reliefs. A company with high sales and no profit pays little or none.
Software used for corporation tax
Part of Accountio’s accounting technology coverage · Glossary
