What Is Corporation Tax? A UK Business Guide

When Is Corporation Tax Due?

Corporation Tax isn’t aligned with the personal tax year. Instead, it follows your company’s accounting period, which is usually 12 months long.

Key Deadlines:

Example:
If your accounting year ends on 31 March 2025, your:

• Payment is due by 1 January 2026
• Tax return (CT600) is due by 31 March 2026

How and When Do You Pay Corporation Tax?

You don’t receive a bill. Instead, your business must:

1. Prepare annual accounts (usually with the help of an accountant)
2. Work out your taxable profit
3. File a Company Tax Return (CT600) with HMRC
4. Pay the tax owed by the deadline

Corporation Tax Deadlines:

For example:
If your financial year ends on 31 March 2025, you must:

• Pay Corporation Tax by 1 January 2026
• File your tax return by 31 March 2026

Corporation Tax Returns Service

What Needs to Be Included in the Company Tax Return?

Your Company Tax Return (CT600) must include:

• Your company accounts (profit & loss, balance sheet)
• A calculation of taxable profit
• A declaration of Corporation Tax due
• Supporting computations and disclosures
• Any reliefs or allowances claimed

You’ll submit this online via HMRC’s service or through your accountant using approved software.

File your company tax return – GOV.UK

What Happens If You Miss a Deadline?

Late payments and filings carry penalties and interest:

• Late return: £100 fine (increases after 3, 6, and 12 months)
• Late payment: Daily interest from due date
• Persistent late filing can lead to more severe sanctions, including company investigations

It’s essential to maintain clear financial records and plan ahead.

Common Allowable Expenses That Reduce Your Tax Bill

HMRC allows you to deduct most business expenses from your profit before calculating Corporation Tax.

These include:

• Salaries and pensions
• Business rent and utilities
• Internet and phone bills
• Insurance (public liability, indemnity)
• Office supplies and software subscriptions
• Advertising and marketing
• Accountant and legal fees
• Equipment and vehicle costs (via capital allowances)

All expenses must be wholly and exclusively for business use. Keep detailed records and receipts for at least 6 years in case of HMRC review.

Deductions and Reliefs to Reduce Corporation Tax

There are various ways to legally reduce your taxable profit:

1. Allowable Business Expenses

Deduct expenses “wholly and exclusively” for business, such as:

• Staff salaries and pensions
• Office rent and utilities
• Professional fees
• Marketing and subscriptions

Allowable Expenses – GOV.UK

2. Capital Allowances

Claim tax relief on the cost of equipment, machinery, and vehicles through the Annual Investment Allowance (AIA) or Writing Down Allowance.

Capital Allowances – GOV.UK

3. Research and Development (R&D) Relief

If your company carries out innovative work in science or technology, you may qualify for generous R&D tax relief even if the project fails.

R&D Tax Credits

4. Loss Relief

If your business makes a loss, you may offset it against previous or future profits to reduce your tax bill.

How to Stay Compliant and Avoid Penalties

Corporation Tax compliance is critical. Here are a few tips:

• File and pay on time: Avoid automatic fines, interest charges, and investigations
• Use accounting software: Tools like Xero, QuickBooks, or The Balance App can automate bookkeeping and tax estimates
• Hire a qualified accountant: Mistakes can be costly professional accounting services saves time and reduces risk
• Plan for payments: Set aside funds monthly or use a separate tax savings account
• Review expenses quarterly: Regular reviews ensure you’re not missing claims

Need Help With Corporation Tax?

Corporation Tax is a fundamental part of running a limited company in the UK. Understanding what Corporation Tax is, when it’s due, and how to manage it strategically can make a big difference to your business’s financial health.

At Accounting Wise, we provide expert Corporation Tax Returns support to UK businesses – from calculating and filing your return, to advising on tax reliefs and deadlines. Whether you’re a startup or an established company, we’ll ensure your obligations are handled efficiently and correctly.