Who pays corporation tax in the UK?

26th October 2026

If you operate a company within the UK, your business may be subject to corporation tax. But, who actually needs to pay corporation tax? Are overseas businesses exempt from paying corporation tax? Do tax rates fluctuate to meet the demands of a growing business? These are all questions that the team at 99p Company Formations have found to be frequent concerns of new business owners.

Ideally, a basic understanding of taxable profits should be in place from the moment you incorporate your business, so you can better prepare for the financial year to come. This way, you know exactly what to expect and how to avoid overspilling your earnings as they come in. So, is your business subject to corporation tax? 

What is corporation tax? 

Corporation tax is money that a company pays to HMRC from its annual profit. Taxable profit is the earnings that remain after all expenses have been paid.

Taxable profit is not always the same as the profit shown in your company accounts. Certain expenses may not be deductible for tax purposes, while tax allowances and reliefs can reduce the amount on which Corporation Tax is calculated.

Who pays corporation tax? 

Every company incorporated in the UK must pay corporation tax to HMRC on profits made worldwide. If you are incorporated in the UK and earning in the UK, your company should be treated as a UK resident; unexempt from UK corporate tax legislation.

This includes:

• Private limited companies 

• Companies limited by guarantee 

• Public limited companies 

• Limited Liability Partnerships 

• Community Interest Companies 

• Overseas companies with a UK office 

• Housing associations 

• Clubs and societies 

• Cooperatives 

Do all overseas companies need to pay corporation tax in the UK? 

An overseas company that operates within the UK only needs to pay corporation tax if:

• It has a fixed, permanent branch in the UK (an office, factory, workshop, or virtual office address with a UK postcode), or

• It is managed from the UK.

Any company without the above that sells products or services to/in the UK does not need to pay corporation tax to HMRC. 

Are there any exemptions from paying corporation tax in the UK? 

You may be exempt from corporation tax if:

• The company is dormant: You may not need to pay corporation tax if you’re not making any profit but you may still be required to file annual accounts and tax returns. 

• The company has never been active: An inactive company makes no profit and is therefore exempt from corporation tax payments. 

Who does not need to pay corporation tax in the UK? 

Your company does not need to pay corporation tax if it is:

• A registered charity: As long as income is spent on relevant charitable purposes. 

• A sole trader: Tax should be paid via self assessment and treated as income tax rather than corporation tax. This includes partnerships. 

How much is corporation tax? 

The corporation tax rates in the UK are dependent on the company’s profits in the previous financial year. For the 2026-2027 tax year, these stand at:

What is marginal relief? 

Marginal relief applies if the company’s total profits in the previous financial year fall between the small rate of £50,000 and the main rate of £250,000. It allows for a gradual and proportional increase in tax rate between the two.

The formula, according to the HMRC company taxation manual, is:

“(F x (U – A)) x (N ÷ A)

Where: 

F = the standard marginal relief fraction (set by Parliament for each financial year)

U = the upper limit

A = the amount of augmented profits of the accounting period

N = the amount of taxable total profits”

How to pay corporation tax online

You need to work out your company’s taxable profits, calculate the corporation tax due and pay HMRC by the relevant deadline. HMRC does not send you a bill telling you exactly how much to pay, so keeping track of your accounting records and tax dates is crucial.

To pay online:

1. Calculate your corporation tax liability: Use your company accounts and tax calculations to establish how much you owe.

2. Find your payment reference: You will need the 17 character corporation tax payment reference for the relevant accounting period. You can usually find this in HMRC correspondence or your business tax account.

3. Choose a payment method: Options include online or telephone banking, debit card or corporate credit card payments, and direct debit. The time needed for the payment to reach HMRC varies by method.

4. Allow enough time for the payment to clear: A payment is not necessarily treated as received on the day you initiate it, so check the processing times before your deadline.

When do you pay corporation tax? 

For most companies with taxable profits of up to £1.5 million, Corporation Tax must be paid nine months and one day after the end of the accounting period.

For example, if your company’s accounting period ends on 31 December 2026, its Corporation Tax payment would normally be due by 1 October 2027, assuming the period and payment rules align as expected.

Companies with larger taxable profits may need to pay Corporation Tax in instalments, so their payment deadlines can differ.

Ready to form your limited company? 

If you’re ready to begin your journey as a limited company director, 99p Company Formation’s company formation service helps you register your business quickly and easily, giving you the confidence that your company has been set up correctly from day one, including company accounts and corporation tax returns to HMRC.

Ready to start your business? Register a limited company with 99p Company Formations today.