How Much Is Corporation Tax for a Limited Company?

With over 5.1 million private limited companies registered in the UK, understanding how much Corporation Tax you pay is essential for every business owner.

If you run a limited company, your tax bill is based on profit, not turnover. The rate you pay depends on how much your business makes, and small changes in profit can push you into a different band.

In this guide, we’ll explain exactly how much Corporation Tax a limited company pays, how the rates work in 2025, and what you can do to stay tax efficient and compliant.

What Is Corporation Tax?

A limited company is legally separate from you as the director. That means the company pays tax on its profits.

Corporation Tax applies to trading profit, rental income, bank interest and gains from selling company assets.

After the company pays Corporation Tax, you are then taxed personally on anything you take out, such as salary or dividends.

How Much Is Corporation Tax in 2025?

Corporation Tax is now tiered.

If your profits are up to £50,000, you’ll pay 19%.

If your profits are between £50,001 and £250,000, you’ll pay somewhere between 19% and 25%. This is called Marginal Relief. It increases gradually as your profits grow.

If your profits are over £250,000, you’ll pay 25%.

So in simple terms, smaller companies pay 19%, larger companies pay 25%, and businesses in the middle move up gradually.

One thing that often gets missed is associated companies. If you own more than one limited company, those profit thresholds are split between them. That can push companies into higher rates quicker than expected.

When Do You Pay It?

You have two key deadlines.

You must pay Corporation Tax 9 months and 1 day after the end of your accounting year.

You must file your CT600 return within 12 months of your year end.

Even if you made a loss, you still need to file a return. Missing deadlines leads to automatic penalties and interest, so it’s important to stay organised.

How Can You Reduce Your Corporation Tax?

Corporation Tax is based on profit. So the lower your taxable profit, the lower your tax bill. The key is doing this properly and legally.

First, make sure you are claiming all allowable business expenses. If an expense is wholly and exclusively for business use, it should be deducted before tax is calculated. This includes things like software, insurance, equipment, rent, utilities, professional fees, salaries, employer NI and pension contributions. Missing expenses means overpaying tax.

Second, think about investment. The Annual Investment Allowance allows you to deduct up to £1 million of qualifying equipment purchases in the year you buy them. That can significantly reduce your taxable profit.

If you have made losses in previous years, you may be able to carry them forward to offset future profits. In some situations, losses can even be carried back for a refund.

Finally, consider how you pay yourself. Salary reduces Corporation Tax because it’s an expense. Dividends do not. Getting the balance right can improve your overall tax position across both Corporation Tax and personal tax.

Do You Need to Register?

Yes. You must register for Corporation Tax within three months of starting business activity.

If your company is not trading, you must tell HMRC it is dormant. Otherwise, they will expect tax returns.

Why Planning Matters

Two companies with the same turnover can pay very different amounts of Corporation Tax.

It comes down to structure, expenses, planning and how profits are extracted.

That’s where proper advice makes a difference.

At Prosper Accountancy, we work with limited companies across the region who want clear answers and practical support. If you’re looking for experienced accountants in West Yorkshire who explain things in plain English, we’re here to help.

If you’re unsure how much Corporation Tax you’ll owe or whether you’re paying more than you should, get in touch. We’ll talk it through properly and help you plan ahead with confidence.

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