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You pay Corporation Tax at the rates that applied in your company’s accounting period for Corporation Tax.

If your company made more than £250,000 profit, you’ll pay the main rate of Corporation Tax.

If your company made a profit of £50,000 or less, you’ll pay the ‘small profits rate’, which is 19%.

You may be entitled to ‘Marginal Relief’ if your profits were between £50,000 and £250,000.

The £50,000 and £250,000 profit thresholds are proportionately reduced for short accounting periods and by the total number of ‘associated companies’ your company has.

You may be able to get deductions or claim tax credits on your Corporation Tax. These are known as allowances and reliefs.

Previous rates

From 1 April 2015 to 31 March 2023, a single rate of Corporation Tax applied to all companies.

The rate you pay on profits from before 1 April 2015 depends on the size of your profits.

Work out your profits when you prepare your Company Tax Return.

If more than one rate applies in your accounting period

Work out how many days each rate applied, then work out the tax due for each.

For example, if your accounting period is 1 January 2023 to 31 December 2023 you pay:

• the rate for the financial year starting 1 April 2022 for 90 days (1 January 2023 to 31 March 2023)
• the rate for the financial year starting 1 April 2023 for 275 days (1 April 2023 to 31 December 2023)

Limited companies may be able to deduct some of the costs of running a business when calculating taxable profit for Corporation Tax.

To determine if a cost (also known as an expense) can be deducted, you need to know if it:

• is a capital expense or a revenue expense
• only has a business purpose

Some expenses are ‘specifically disallowed’ - for example, entertaining clients. These expenses cannot be deducted.

There are different rules for expenses which are made in relation to a loan relationship and intangible assets.

Whether something is a capital or revenue expense can depend on:

• what the business does
• what the business has spent money on
• how the business uses any assets bought as part of the business
• the effect that the expense has on the business

Make sure you understand the reason for each expense and keep accurate and detailed business records.

Capital expenses

Capital expenses commonly include the costs to buy, sell or improve assets that the company uses over a long time.

For example:

• buying a van to deliver goods - it’s a long-term tool for the business
• buying land to build a warehouse to store your products - the land is a long-term asset
• paying legal fees to buy a property or secure a long-term contract - these relate to buying a capital asset
• buying a server for the business that will be used for several years

Capital expenses cannot be deducted for Corporation Tax purposes. However, the company may be able to claim capital allowances for some of these expenses.

Revenue expenses

Revenue expenses are the costs included in the day-to-day running of the business. These are usually regular or recurring costs.

For example:

• buying a van to sell on because the business sells vans - the van is part of the trading stock
• buying land because the business develops properties and builds houses for sale - the land is part of the trading stock
• paying an accountant to prepare the company’s accounts - this is part of running the business

You can deduct revenue expenses when calculating the company’s taxable profit if they have been incurred wholly for a business purpose. You will need the taxable profit figure to complete the Company Tax Return.

Further guidance

If you need more information, check the technical guidance on the difference between capital and revenue expenses.

A limited company may be able to claim allowances and reliefs to reduce a tax bill. What a business can claim will depend on the nature of the business and its assets.

Anything you or your employees get personal use from must be treated as a benefit.

Capital allowances

Claim capital allowances if you buy assets that you keep to use in your business, for example:

• equipment
• machinery
• business vehicles, for example cars, vans, lorries

Other reliefs

You may be able to make a claim for:

• Research and Development (R&D) Relief
• The Patent Box if your company makes a profit from patented inventions
• reliefs for creative industries if your company makes a profit from theatre, film, television, animation or video games
• relief on goodwill and other relevant assets, such as customer relationships and unregistered trade marks
• Disincorporation Relief if you’re closing your company and becoming a sole trader, ordinary business partnership or limited partnership
• terminal, capital and property income losses
• trading losses

Marginal Relief

Your company or organisation may be entitled to ‘Marginal Relief’ if its taxable profits from 1 April 2023 are between £50,000 and £250,000.

Overpayment relief

If you think you have overpaid Corporation Tax you may be able to claim it back.

You can find out if you should claim overpayment relief and how to make a claim.