Understanding Corporation Tax for Small Limited Companies in the UK Understanding Corporation Tax for Small Limited Companies in the UK: Updated Guide for 2025 For small limited companies operating in the UK, understanding Corporation Tax is essential for compliance and effective financial planning. At Filing Accounts, we provide up-to-date insights to help you navigate the current Corporation Tax landscape for the 2025/26 financial year. What is Corporation Tax? Corporation Tax is a tax on the profits made by UK companies. If your small limited company is registered in the UK, it must pay Corporation Tax on its worldwide profits, including income from trading, investments, and capital gains. The tax is calculated based on your company’s accounting period, and payment is due within nine months and one day after the end of that period. Corporation Tax Rates for 2025/26 The UK government maintains a tiered Corporation Tax system designed to support smaller businesses while ensuring larger companies contribute appropriately: Profit Level Tax Rate Profits up to £50,000 19% (Small Profits Rate) Profits between £50,001-£250,000 Marginal Relief (Sliding scale between 19% and 25%) Profits over £250,000 25% (Main Rate) Small Profits Rate (SPR): Companies with profits up to £50,000 pay 19%, providing relief to smaller businesses. Marginal Relief: For profits between £50,000 and £250,000, a tapered relief applies, gradually increasing the effective tax rate from 19% to 25%. This prevents sudden jumps in tax liability as profits grow. Main Rate: Companies with profits exceeding £250,000 pay the full 25% rate Calculating Corporation Tax with Marginal Relief Marginal Relief is calculated using a specific formula that adjusts the tax payable for profits within the £50,000 to £250,000 band. This ensures a smooth transition between the small profits rate and the main rate. It is important to note that if your company has associated companies, the profit thresholds are divided accordingly, which can affect eligibility for Marginal Relief Key Allowances and Reliefs for Small Companies Annual Investment Allowance (AIA): The AIA cap remains at £1 million, allowing small companies to deduct the full cost of qualifying capital expenditure on equipment, machinery, or technology from their taxable profits, reducing Corporation Tax liability. Patent Box Relief: If your company profits include income from patented inventions, you may benefit from a reduced Corporation Tax rate of 10% on those profits. Enhanced Allowances: There are also enhanced allowances to encourage green investments and research and development, which can further reduce taxable profits. Important Compliance and Filing Information Your company must file a Corporation Tax Return (CT600) with HM Revenue & Customs (HMRC) after the end of your accounting period. Filing deadlines and accurate record-keeping are critical to avoid penalties. Changes in company size thresholds effective from April 2025 may affect reporting and audit requirements, potentially easing compliance burdens for many small companies. Practical Tips for Small Limited Companies Maintain Accurate Records: Detailed financial records help ensure correct tax calculations and maximize allowable deductions. Plan for Marginal Relief: Understand how Marginal Relief applies if your profits are near the £50,000 to £250,000 thresholds. Seek Professional Advice: Consider consulting with tax professionals or using accounting services like Filing Accounts to optimize your tax position and ensure compliance. Conclusion Corporation Tax remains a vital consideration for small limited companies in the UK. With the 2025/26 rates set at 19% for profits up to £50,000, a tapered Marginal Relief band up to £250,000, and a 25% main rate above that, understanding these thresholds and reliefs is key to effective tax management. Filing Accounts is committed to helping small businesses stay informed, compliant, and financially efficient in managing their Corporation Tax obligations. For expert assistance with your company accounts and Corporation Tax filings, contact Filing Accounts today. At Filing Accounts, we provide expert Corporation Tax support and accounts filing services for small limited companies across London, including accountants in Hounslow, accounts filing in Feltham, and many other locations such as Brentford, Twickenham, and Isleworth. Filing Accounts proudly supports small limited companies with expert accountants and accounts filing services in Hounslow, Feltham, Brentford, Ealing, Twickenham, Isleworth, Teddington, Richmond, Harrow, Wembley, Staines, Heathrow, Slough, Hammersmith, Shepherd’s Bush, Chiswick, Kensington, Wimbledon, Putney, Acton, West Drayton, Hayes, Southall, Greenford, Camden, Barnet, Croydon, Enfield, Hackney, Lambeth, Lewisham, Merton, Newham, Southwark, Sutton, Tower Hamlets, Waltham Forest, Wandsworth, Westminster, Barking and Dagenham, Bexley, Bromley, City of London, City of Westminster, Greenwich, Haringey, Havering, Hillingdon, Islington, Kingston upon Thames, Redbridge, and many other London boroughs and surrounding areas.
