How to pay corporation tax: a guide for UK businesses

Corporation tax is the tax that limited companies pay on their profits. It's different from income tax (which you pay as an individual) and VAT (which applies when you sell goods and services). 

All limited companies, foreign companies with a UK branch or office and clubs, co-operatives, and unincorporated associations must pay corporation tax (external link).¹ (external link) It applies to all taxable profits your company makes, including:

• Trading income – money from your day-to-day business activities. 
• Investment income – things like interest on savings or dividends from other companies. 
• Capital gains – profits from selling assets for more than they cost.

Working out corporation tax is easier than it might sound. Here’s the basic process: 

1. Work out your taxable profit – add up all your company’s income for the accounting period, then subtract allowable business expenses and capital allowances. 
2. Apply the correct tax rate – this varies for profits under £50,000 (19%) and profits over £250,000 (25%). For profits in between, for example, £100,000, you get marginal relief. This means an effective rate somewhere between the other two rates. 
3. Use the formula: Corporation Tax = Taxable Profit × Tax Rate.² (external link)

Corporation tax payment methods

HMRC gives you several options for paying your corporation tax. Here are the main methods: 

• HMRC online payment service – pay directly through your business bank account on the HMRC website. You'll need your 17-character corporation tax payment reference (company UTR number). 
• Direct debit – set up a one-off or recurring direct debit through your HMRC online account. 
• BACS, CHAPS, or Faster Payments – make a bank transfer from your business account (you'll need HMRC's bank details and your corporation tax reference). 
• Debit or corporate credit card – pay online through HMRC's secure portal. Personal credit cards aren't accepted, only business ones are. 
• At your bank or building society – some banks let you pay in person.³ (external link)

How to register for corporation tax

When you register your company with Companies House, HMRC automatically registers you for corporation tax as well.⁴ (external link) Within a few days, you should receive a letter with your Unique Taxpayer Reference (UTR) number and information about filing your first return. 

To manage your corporation tax online, you can add it to your HMRC online services (external link) account. If you don't have a business tax account, you can register with HMRC first. Once you're logged in, you can add corporation tax using your UTR and company registration number. 

See our guide for more information about how to register a business.

HMRC may apply fines and penalties if corporation tax deadlines aren’t met. These are the key dates associated with corporation tax deadlines: 

• Payment deadline: Your corporation tax must be paid within nine months and one day after your accounting period ends. 
• Filing deadline: Your Company Tax Return (CT600 form (external link)) needs to be filed within 12 months of your accounting period ending.⁵ (external link) 

Large companies – those with profits over £1.5 million – work to a different schedule and pay their corporation tax in quarterly instalments throughout the accounting period.⁶ (external link)

Corporation tax rates in the UK have changed in recent years. Here are the rates for current and recent tax years:

In April 2023, the government brought back a tiered system after several years of a flat 19% rate. If your profits sit between £50,000 and £250,000, marginal relief softens the jump to 25%, creating a gradual increase rather than a sudden leap.⁷ (external link)

Understanding the payment timeline can help you plan and budget properly. Below is an outline of a typical corporation tax schedule. 

• Close your accounting period – your financial year ends. 
• Calculate your tax liability – businesses often work with an accountant to calculate taxable profit and what’s owed.
• Prepare your Company Tax Return – complete the CT600 form with all your financial information. 
• Pay your corporation tax – make payment within nine months and one day of your accounting period ending. 
• File your CT600 return – submit your return to HMRC within 12 months of your accounting period ending. 
• Keep your records – hold onto all supporting documents for at least 6 years.⁸ (external link)

Filing your corporation tax late can trigger automatic penalties: 

• If you’re one day late, you receive a £100 fine. 
• If you’re three months late, you receive a second £100 fine. 
• If you’re six months late, HMRC estimates your corporation tax bill and adds a penalty of 10% of the unpaid tax. 
• If you’re 12 months late, there’s a second penalty of 10% of any unpaid tax.⁹ (external link)

HMRC's Business Payment Support Service (external link) is there to support businesses that might not be able to pay on time.

What are the corporation tax reliefs?

There are several tax reliefs available, which may help reduce your corporation tax bill if you qualify. 

• Research and Development (R&D) tax relief – supports companies that work on innovative projects in science and technology. Small and medium-sized enterprises (SMEs) can deduct an additional 86% of qualifying costs.¹⁰ (external link) 
• Creative industry tax reliefs – companies working in film, TV, animation, video games, theatre, and orchestral productions may be able to claim this tax relief.¹¹ (external link) 
• Patent Box – apply a reduced 10% corporation tax rate on profits from patented inventions and innovations.¹² (external link)
• Capital allowances – claim tax relief on certain business assets like vehicles, equipment, and property improvements.¹³ (external link)

Many of these reliefs need specific claims and documentation. Some businesses choose to use accountants to support claims or compliance.