The rates, plainly
Corporation tax is charged on your company's profits (income minus allowable costs), and the rate depends on how much you make:
- 19% — the small profits rate, on profits up to £50,000.
- 25% — the main rate, on profits over £250,000.
- Between £50,000 and £250,000 — you pay 25% but get marginal relief, which tapers the effective rate up smoothly from 19% to 25% rather than jumping.
Most early-stage startups sit in the 19% band. But two things catch founders out — the deadlines (the payment is due before the return) and "associated companies," which can drag your thresholds down. The full guide covers both, plus the reliefs that cut the bill.
The deadline quirk every founder misremembers
Corporation tax runs on an unusual timetable:
- Payment is due 9 months and 1 day after your accounting period ends.
- The return (CT600) is due 12 months after the period ends.
Yes — you have to pay the tax three months before the return that calculates it is technically due. In practice you (or we) prepare the accounts and return early so you know the number, then pay by the earlier date. Miss the payment date and interest runs; miss the filing date and penalties start at £100 and escalate. This is exactly why a live tax estimate in FreeAgent matters — the bill is never a shock.
The reliefs that cut the bill — legitimately
- Every allowable cost. Salaries (including a director's salary), software, subscriptions, professional fees, travel — all reduce taxable profit. Capture everything; leaked expenses are tax overpaid.
- Capital allowances. Equipment, computers and machinery are relieved, usually in full in the year of purchase via the Annual Investment Allowance.
- R&D tax relief. If you're solving genuine technical problems, this can return a meaningful slice of development spend — see our post on R&D relief for startups.
- Pension contributions. Company contributions to a director's pension are deductible and free of National Insurance — one of the most efficient ways to extract value (see paying yourself).
- Loss relief. Early-year losses (common for startups) can be carried forward against future profits, or in some cases back or sideways — valuable, and worth structuring deliberately.
Watch: associated companies If you (or your group) control more than one company, the £50,000 and £250,000 thresholds are divided between them. Two associated companies each get a £25,000 small-profits threshold, not £50,000 — which can push profits into marginal-relief territory sooner than you'd expect. If you run more than one company, tell your accountant; it changes the maths.
What you actually have to do
- Register for corporation tax with HMRC (within 3 months of starting to trade).
- Keep digital records through the year (FreeAgent, included in our packages).
- Prepare statutory accounts and the CT600 after year-end.
- Pay by 9 months + 1 day; file by 12 months.
All of which we handle end-to-end from £49 + VAT a month — with the bill forecast all year so it's planned for, not discovered. See pricing or get started.
