Corporation tax is charged on the profits of UK limited companies. The amount your company pays depends on total taxable profits during the financial year.
Corporation Tax Rates in 2026
As of 2026, corporation tax operates on a tiered structure:
| Annual Profits | Corporation Tax Rate |
|---|---|
| Up to £50,000 | 19% (Small Profits Rate) |
| £50,000 - £250,000 | Marginal Relief applies |
| Over £250,000 | 25% (Main Rate) |
Companies with profits between £50,000 and £250,000 benefit from marginal relief, which gradually increases the effective rate between 19% and 25%.
What Counts as Taxable Profit?
Corporation tax is charged on taxable profits, not turnover. Profits are calculated after deducting allowable business expenses such as:
- •Staff salaries and wages
- •Director remuneration
- •Office and operating costs
- •Professional fees
- •Certain capital allowances
Salary paid to directors reduces taxable profit, while dividends are paid from profits after corporation tax.
When Is Corporation Tax Due?
Corporation tax is generally due nine months and one day after the end of your company's accounting period.
Late payment can result in interest and penalties, so forward planning is important, especially if you rely on a dedicated corporation tax service to keep liabilities controlled.
How Directors Reduce Corporation Tax Legally
Effective tax planning involves:
- •Claiming all allowable expenses
- •Using salary efficiently
- •Managing timing of expenditure
- •Planning capital investment
Many limited companies benefit from structured monthly management accounts to monitor profit levels and anticipate corporation tax liabilities throughout the year.
Do Small Sheffield Companies Pay Less?
Corporation tax rates apply nationally across the UK. Whether your limited company operates in Sheffield or elsewhere, the same profit thresholds apply.
Local support from a Sheffield Chartered Management Accountant can help ensure compliance and effective planning.
Frequently Asked Questions
How is corporation tax calculated?
Corporation tax is calculated on taxable profit after allowable expenses have been deducted from total income.
Do dividends reduce corporation tax?
No. Dividends are paid from profits after corporation tax has already been calculated.
Can I reduce corporation tax by paying myself salary?
Yes. Salary is an allowable expense and reduces taxable profit, although it may increase National Insurance liabilities.