Corporation Tax returns for limited companies

Who pays Corporation Tax, and from when

A UK limited company pays Corporation Tax on its taxable profits: trading profits, investment income such as interest, and gains when it sells assets. Sole traders and partners pay Income Tax on business profits through Self Assessment instead.

A company’s first accounting period for Corporation Tax starts when it begins business activity, which includes trading, buying and selling, and earning income. HMRC must be told within three months of that date. Corporation Tax can be set up when the company is registered at Companies House, or added later through HMRC’s business tax account. The start date you give HMRC fixes when the first accounting period begins.

An accounting period for Corporation Tax can never be longer than 12 months. If a company’s first accounts cover 15 months, for example, there are two Company Tax Returns: one for the first 12 months and one for the remaining three.

Paying and filing: two separate deadlines

Corporation Tax is usually paid before the return is due.

For a year ending 31 March 2026, that means paying by 1 January 2027 and filing by 31 March 2027. The amount has to be known by the payment date, so in practice the computation is finished before then.

Large companies pay in instalments

A company with taxable profits above £1.5 million pays in quarterly instalments, the first falling 6 months and 13 days after the start of the accounting period. Companies with profits above £20 million follow a different timetable. The £1.5 million threshold is divided by the number of associated companies plus one. There is a one-year exception for a company that crosses the threshold for the first time with profits of no more than £10 million.

Late filing penalties

HMRC currently charges £200 if the return is a day late and another £200 at three months. At six months it estimates the tax and adds 10% of the unpaid tax, with another 10% at twelve months. If a return is late three times in a row, each £200 penalty becomes £1,000. Linx Tax Defence has a guide to HMRC late filing penalties.

Corporation Tax rates for the financial year 2026

Corporation Tax rates are set for financial years running from 1 April to 31 March. For the financial year 2026 (1 April 2026 to 31 March 2027):

Marginal relief uses a standard fraction of 3/200. It brings the overall rate up gradually between the two limits, so each extra pound of profit inside the band is taxed at a marginal rate above 25%.

Both limits are cut for an accounting period shorter than 12 months. They are also divided by the number of associated companies plus one. With three associated companies, for example, the limits are divided by four and become £12,500 and £62,500. HMRC sets out the current rates and limits.

What goes into the computation

The profit in the accounts is where the computation starts. To reach taxable profit, it is adjusted as follows.

• Costs that are not deductible are added back. These include depreciation, client entertaining, fines and anything spent privately.
• Capital allowances are claimed in place of depreciation. The Annual Investment Allowance gives relief on up to £1 million a year of most plant and machinery, though not cars. Companies controlled by the same person share a single allowance. Companies can also claim full expensing on new and unused main-rate plant and machinery. A 40% first-year allowance applies to qualifying new main-rate assets bought on or after 1 January 2026. From 1 April 2026 the main-pool writing down allowance fell from 18% to 14%.
• Losses are relieved. A trading loss can be set against other profits of the same period, carried back against the previous 12 months, or carried forward. Restrictions and claim deadlines apply.
• The director’s loan account is reviewed. If a participator, typically a shareholder-director, owes the company money at the year end and does not repay it within nine months, the company pays a section 455 charge. The rate matches the dividend upper rate for the tax year the loan was made: 35.75% for loans made in 2026-27, and 33.75% for loans made between 6 April 2022 and 5 April 2026. The charge can be reclaimed from 9 months and 1 day after the end of the accounting period in which the loan is repaid. A loan of more than £10,000 at any time in the year is normally also a taxable benefit, which brings in payroll reporting.

Filing in iXBRL

Company Tax Returns must be filed online, with the accounts and computation in iXBRL. iXBRL is a format that tags each figure so that HMRC’s systems can read it. HMRC’s own service for filing company accounts and tax returns closed on 31 March 2026. Returns now go through commercial software, and paper is accepted only where there is a reasonable excuse or the return is in Welsh.

What we do

• Prepare the Corporation Tax computation from your year-end accounts, including capital allowances and loss claims.
• Check whether the company has associated companies and apply the right limits.
• Review the director’s loan account before the year end, while there is still time to deal with an overdrawn balance.
• Prepare the CT600 and the iXBRL accounts and computation, send them to you for approval and file them once you have approved them.
• Tell you how much to pay, by when, and the payment reference to use.
• Answer HMRC’s questions about the return. If HMRC opens a formal enquiry, Linx Tax Defence handles compliance checks.

What we need from you

• Your bookkeeping records for the year, or access to them. If the books need bringing up to date first, see bookkeeping.
• Invoices for assets bought or sold, with dates.
• Movements on the director’s loan account and any dividends declared.
• Details of any other companies you, or people connected with you, control.
• Copies of HMRC letters, the company’s Unique Taxpayer Reference, and authority for us to act as the company’s agent.