How corporate tax works in United Kingdom
UK companies pay corporation tax on taxable profits. The main rate is 25% if profits are above GBP 250,000, the small profits rate is 19% if profits are GBP 50,000 or less, and marginal relief applies between the two.
Associated companies reduce the GBP 50,000 and GBP 250,000 thresholds, so group structures can move a company into a higher effective rate faster than expected.
UK-resident companies are generally taxed on worldwide profits. Returns are usually due 12 months after the end of the accounting period, and the tax bill is usually due 9 months and 1 day after the period end.
Tax rates at a glance
- Corporation tax
- 25%Main rate
- Small profits rate
- 19%
- Marginal relief band
- GBP 50,000 to GBP 250,000
- VAT
- 20%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersAgenciesSaaS businessesHolding companiesTrading groups
Watch out for
- Large companies with taxable profits above GBP 1.5 million pay Corporation Tax in instalments, not just at year end.
- UK dividends generally have no withholding tax, but interest and some royalties can be subject to 20% withholding, with a proposal to raise UK interest withholding to 22% from 6 April 2027.
- Payroll National Insurance, VAT and Companies House filings can matter almost as much as the corporation tax rate itself.
Frequently asked questions
Does the UK have a corporation tax?
Yes. The UK charges corporation tax on company profits, with a 25% main rate and a 19% small profits rate.
Do all companies pay 25%?
No. Smaller companies can pay 19%, and companies with profits between GBP 50,000 and GBP 250,000 may qualify for marginal relief.
Are UK company dividends taxed at source?
Ordinary UK company dividends usually are not subject to withholding tax, although the shareholder may still owe dividend tax personally.