Corporation Tax basics: rates, deadlines & what's taxed

Most UK Innovator Founder Visa applicants spend months stress-testing their business concept against the 4F formula and endorsement criteria. Then the company starts trading, the first accounting year ends, and a question arrives that the visa application never prepared them for: what exactly is Corporation Tax, when does HMRC want it, and how much of the company's profit will it take? Corporation Tax (CT) is the tax a UK limited company pays on its profits — not its turnover, not the salary you draw, but the company's own taxable profit. Get the basics right early and it becomes a manageable line in your financial model. Leave it until the bill arrives and you can find yourself scrambling for cash at exactly the wrong moment.

What is Corporation Tax and who pays it?

Corporation Tax is a direct tax on the profits of UK limited companies and certain other incorporated entities. The company — not you personally — is the taxpayer. This is one of the most practically important distinctions in UK tax law: as a director and shareholder you pay income tax and National Insurance on the money you draw from the company as salary or dividends; the company separately pays Corporation Tax on what it earns.

HMRC administers the tax, and there is no automatic withholding mechanism equivalent to PAYE. The company is responsible for registering with HMRC for Corporation Tax within three months of starting to trade, then calculating, declaring, and paying its own liability to strict deadlines. Getting those deadlines wrong generates automatic penalties even if the underlying tax is eventually paid in full.

For Innovator Founder Visa applicants, this matters at the business-plan stage too. Endorsement assessors scrutinise the viability of financial projections, and a model that ignores the CT liability — or calculates the payment timing incorrectly — signals a gap in commercial literacy. See the full UK tax map for founders for how CT sits alongside income tax, VAT, and National Insurance.

What counts as taxable profit?

Taxable profit is not identical to accounting profit, though both start from the same place. You begin with the profit shown in your profit and loss account — revenue minus the costs of running the business — then make a series of HMRC-mandated adjustments.

Costs must be wholly and exclusively incurred for the purposes of the trade to be deductible. A phone used only for business is deductible in full; a phone that also serves personal use requires apportionment, or is excluded. Salaries, rent, software licences, accountancy fees, and bank charges are all standard examples of qualifying costs. Items with an element of personal benefit — private travel, entertaining clients in a way that falls outside HMRC's guidance, or expenditure with no clear business purpose — are either disallowed or treated as benefits in kind.

Capital expenditure follows different rules. Standard accounting records depreciation on assets each year, but HMRC does not accept depreciation as a tax deduction. Instead, it operates a system of capital allowances. The Annual Investment Allowance (AIA) lets most businesses deduct the full cost of qualifying plant and machinery in the year of purchase. Longer-life assets and certain other categories attract writing-down allowances spread over time. The result: your taxable profit can differ meaningfully from your accounting profit once capital-allowance adjustments are applied. The full picture — including R&D credits and the Patent Box — is in our guide to R&D credits, Patent Box and capital allowances.

What are the Corporation Tax rates?

As of the 2026/27 tax year, the UK operates two Corporation Tax rates. Always confirm current thresholds and percentages at GOV.UK, as these can change at any Budget.

Marginal Relief smooths the transition between rates so companies in the middle band pay an effective rate that increases gradually rather than jumping immediately. Thresholds are proportionally reduced for accounting periods shorter than 12 months and where the company has associated companies — a relevant consideration if you set up subsidiary entities later.

For a typical seed-stage startup in its first two to three trading years, profits are likely to fall within the small-profits band or remain in the marginal relief range. Modelling your CT liability at the correct rate for your projected profit level keeps your financial projections credible in front of an endorsement assessor.

When do you pay, and what do you file?

There are two separate deadlines — one for the money, one for the paperwork — and they fall at different times. Missing either one triggers automatic penalties.

Suppose your company's accounting year runs 1 January to 31 December 2026. The CT payment is due by 1 October 2027. The CT600 must reach HMRC by 31 December 2027. HMRC expects the payment before the return is filed — which means you need to estimate the liability without waiting for your accountant to finalise the full computation.

Statutory annual accounts are filed at Companies House (the public destination for company filings), typically within nine months of the year end for private companies. Those accounts form the basis of the CT600 computation that goes to HMRC. The accounts and the CT600 go to different destinations — Companies House and HMRC respectively — and both must be delivered on time. The company filing calendar sets out all the deadlines in one view; the directors' responsibilities guide explains the legal obligations those deadlines create.

Reliefs that can reduce your Corporation Tax bill

Corporation Tax is charged on taxable profit, and several legitimate reliefs reduce that profit — or in some cases generate a direct cash payment:

R&D tax credits: companies investing in qualifying research and development can claim an enhanced deduction or an above-the-line credit under the current merged R&D scheme. For loss-making periods some credits can be surrendered for a cash payment from HMRC. For tech startups working on novel software, hardware, or processes this is often the single most valuable relief available. See the linked guide in the taxable profit section above for the full picture on each relief type.

Capital allowances: the AIA and writing-down allowances replace depreciation for tax purposes. Properly claimed, they can defer or eliminate the CT liability on a year's capital spending — deferring means the cash stays in the business longer.

Trading loss relief: a loss in one period can be carried back against profits from the prior year, generating a CT repayment, or carried forward to shelter future profits. For early-stage companies that expect losses before profitability, this relief is worth modelling explicitly in the financial plan.

Patent Box: if the company owns qualifying patents and earns income from them, it may elect to pay CT on that income at a reduced rate. Relevant if your startup is building defensible intellectual property.

None of these reliefs apply automatically. Each requires a formal claim in the CT600, backed by records accumulated during the year. Building the habit of tracking R&D activity, capital purchases, and IP development from the start is the most reliable way to ensure everything you are entitled to is claimed.

Run a free visa-readiness assessment at TorlyAI — including whether your financial model reflects the CT timeline accurately — with no card required on the free tier. Browse the full Financial Fluency series at /insights.

Key takeaways

• Corporation Tax is charged on the limited company's taxable profit — separate from the income tax and National Insurance you pay on your own salary or dividends as a director.
• As of the 2026/27 tax year there are two rates — a small-profits rate and a higher main rate — with marginal relief between them; always verify current thresholds and percentages at GOV.UK.
• The CT payment is due 9 months and 1 day after the accounting period ends; the CT600 return follows at 12 months — two deadlines, both carrying automatic penalties if missed.
• Taxable profit differs from accounting profit: depreciation is replaced by capital allowances, and only costs that are "wholly and exclusively" for the trade are deductible.
• Reliefs including R&D credits, capital allowances, and loss relief can materially reduce the bill or generate cash repayments — they require a claim backed by records kept throughout the year.

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• uk-tax
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