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What is Corporation Tax?
Corporation Tax is paid at the rates that applied in your company's accounting period for Corporation Tax. If more than one rate applies, calculate how much is due based on the number days each rate applied, for example, 45 days at the rate for the 2022/23 accounting year and 320 days at the rate for the 2023/24 accounting year. You can find out your accounting period on your company's online account.
Changes to Corporation Tax from 1st April 2023
From 1st April 2023, the Corporation Tax rate for profits over £50,000 will rise to 25%. Companies with profits between £50,000 and £250,000 will be eligible for Marginal Relief, which will reduce the company’s tax bill.
Find out more about Corporation Tax on our accounting glossary.
Example: How Hannah pays Corporation Tax
Hannah is a director of a company which has an accounting year that is the same as the tax year. In order to work out her Corporation Tax bill she needs to know three things:
- The business’s total accounting profit for the year: £42,301
- Costs that aren’t allowable for tax relief (e.g. the cost of entertaining clients): £872
- Non day-to-day running costs that are allowable for tax relief (e.g. the cost of a new laptop): £650
First, Hannah must work out the amount that the company must pay tax on (known as the taxable profit):
£42,301 + £872 - £650 = £42,523 taxable profit
With the Corporation Tax rate at 19%, WordPress Developers Ltd is due to pay:
£42,523 x 19% = £8,079.37 in Corporation Tax
How to pay your Corporation Tax bill
| Online or telephone banking (Faster Payments) | Same or next day |
| CHAPS | Same or next day |
| Bacs | Three working days |
| Debit card | Three working days |
| Credit card (1.5% charge) | Three working days |
| Existing Direct Debit | Three working days |
| New Direct Debit | Five working days |
| At your bank or building society | Three working days |
Note: For most payments you’ll need your 17-character Corporation Tax payslip reference for the accounting period you’re paying. This can be found on the payslip that HMRC sent you after you submitted your return or through the company’s HMRC online account.
Online or telephone banking: If you’re paying by online or telephone banking (Faster Payments, CHAPS or Bacs) details for the HMRC bank account you should pay your tax bill into can be found here.
Debit or credit card: If you are paying by debit or credit card you can do so by following the links from your HMRC online account.
Direct Debit: You can set up a Direct Debit from your HMRC online account. Make sure you do this at least three working days before you submit your return to ensure the payment is taken from your account in time. Once the Direct Debit is set up, HMRC will collect payments from your account within three working days.
At your bank or building society: At your bank or building society you can pay your Corporation Tax bill by debit card, cash or cheque made payable to ‘HM Revenue and Customs only’ followed by your 17-character corporation tax payslip reference. Again, you’ll need the payslip that HMRC sent you after you submitted your Corporation Tax Return.
Timeline of Corporation Tax rates
| 2023-24 | |
|---|---|
| Profit below £50,000 | 19% |
| Profit between £50,000 and £250,000 (eligible for Marginal Relief) | 25% |
| Profit above £250,000 (not eligible for Marginal Relief) | 25% | 2022-23 |
| Profit below £300,000 | 19% |
| Profit above £300,000 | 19% | 2021-22 |
| Profit below £300,000 | 19% |
| Profit above £300,000 | 19% | 2020-21 |
| Profit below £300,000 | 19% |
| Profit above £300,000 | 19% | 2019-20 |
| Profit below £300,000 | 19% |
| Profit above £300,000 | 19% | 2018-19 |
| Profit below £300,000 | 19% |
| Profit above £300,000 | 19% | 2017-18 |
| Profit below £300,000 | 19% |
| Profit above £300,000 | 19% | 2016-17 |
| Profit below £300,000 | 20% |
| Profit above £300,000 | 20% | 2015-16 |
| Profit below £300,000 | 20% |
| Profit above £300,000 | 20% | 2014-15 |
| Profit below £300,000 | 20% |
| Profit above £300,000 | 21% | 2013-14 |
| Profit below £300,000 | 20% |
| Profit above £300,000 | 23% | 2012-13 |
| Profit below £300,000 | 20% |
| Profit above £300,000 | 24% |
Disclaimer: The content included on this page is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included on this page. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.