Corporation Tax

Corporation Tax is the tax UK Ltd companies pay on their profits. From April 2023:

Small profits rate: 19% on profits up to £50,000.

Main rate: 25% on profits over £250,000.

Marginal relief between £50k and £250k: tax = profit × 25% − (£250,000 − profit) × 3/200. Effective rate gradually rises from 19% at £50k to 25% at £250k.

Salary, employer NI, pension contributions, and most legitimate business expenses are deductible from profit before CT is calculated.

Related terms

• Employment Allowance — A reduction in an eligible employer's NI bill — £10,500/year (raised from £5,000 in April 2025).
• Dividend allowance — A tax-free portion of dividend income — £500 for 2026-27 (down from £2,000 in 2022-23).
• Personal Allowance — The first slice of income you can earn tax-free each year — £12,570, frozen until April 2031.
• Dividend tax — The tax charged on dividend income above the £500 dividend allowance — 10.75%, 35.75%, or 39.35% depending on your tax band (2026-27).
• Marginal Relief (Corporation Tax) — The taper between 19% and 25% Corporation Tax for company profits between £50,000 and £250,000.