What is the Corporation Tax Rates in the UK?

Corporation Tax is a tax that UK businesses pay on their profits. It applies to both small and large companies, making it a key financial responsibility for businesses operating in the UK. Unlike Income Tax, which individuals pay, Corporation Tax is charged on company earnings after deducting expenses but before distributing dividends.

Who Needs to Pay Corporation Tax?

Corporation Tax applies to a wide range of businesses and organisations, including:

• Limited Companies – All UK-based limited companies must pay Corporation Tax on their taxable profits. This includes businesses registered with Companies House.
• Foreign Companies with UK Branches – If an overseas company operates in the UK through a branch or office, it must pay Corporation Tax on any profits made within the country.
• Clubs, Societies, and Associations – Some non-profit organisations, such as sports clubs, cooperatives, and trade associations, may also be liable for Corporation Tax if they generate taxable profits.

What Counts as Taxable Profits?

Corporation Tax is charged on different types of earnings, including:

• Profits from trading activities (selling products or services).
• Income from investments.
• Capital gains from selling assets, such as property, shares, or equipment.

Since businesses do not receive a personal allowance like individuals, they must pay Corporation Tax on all taxable profits, regardless of the amount.

The corporation tax rate for company profits is 25%.

As of April 1, 2023, the UK's Corporation Tax structure has been revised to introduce a tiered system based on company profits. This change aims to create a fairer tax environment by aligning tax rates more closely with a company's profitability. The current UK Corporation Tax rate is 25% for all limited companies.

Breakdown of the Current Corporation Tax Rates:

• Main Rate: Companies with profits exceeding £250,000 are subject to a Corporation Tax rate of 25%.
• Small Profits Rate: Companies with profits of £50,000 or less benefit from a reduced Corporation Tax rate of 19%.
• Marginal Relief: For companies with profits between £50,000 and £250,000, a system of Marginal Relief applies. This relief provides a gradual increase in the effective Corporation Tax rate, bridging the gap between the small profits rate and the main rate.

Corporate Tax Thresholds

• Small Companies: Businesses with profits at or below £50,000 pay Corporation Tax at the small profits rate of 19%. This lower rate supports smaller enterprises by reducing their tax burden.
• Large Companies: Enterprises with profits exceeding £250,000 are taxed at the main rate of 25%. This higher rate reflects the increased profitability and capacity of larger corporations to contribute more in taxes.
• Medium-Sized Companies: Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate.

Marginal Relief for Corporation Tax

Businesses with profits below £250,000 may qualify for Marginal Relief, which helps reduce their Corporation Tax bill.

• Lower limit: £50,000
• Upper limit: £250,000

Marginal Relief applies to companies with profits between these limits, gradually increasing the tax rate from the small profits rate to the main Corporation Tax rate. This means eligible businesses pay a rate lower than the standard 25%, easing the tax burden as profits grow.

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