Corporate income tax (CIT) – rates

For the financial year beginning 1 April 2025, UK companies pay Corporation Tax at the following rates:

• Main rate (profits over £250,000): 25%
• Small profits rate (profits up to £50,000): 19%
• Marginal relief applies on profits between £50,000 and £250,000, tapering the effective rate from 19% up to 25%.

These thresholds are proportionately adjusted for accounting periods shorter than 12 months or where there are “associated” companies gov.uk.

Corporate income tax – general information

Residence

Taxable income

Taxable income for UK companies includes profits from trades, professions or vocations carried on in the United Kingdom, together with non-trading investment income such as interest, dividends, and rental income from UK properties. Additionally, profits from the disposal of assets (known as chargeable gains) are included, with allowable costs deducted from the proceeds.

The calculation of taxable income starts with the accounting profit as shown in the company’s financial statements. Disallowable expenses, such as entertaining costs and fines, are then added back. Allowable deductions and capital allowances are subtracted, and net chargeable gains (after accounting for losses and indexation) are incorporated. Adjustments are made for group relief, loss relief, and controlled foreign company (CFC) charges, in accordance with relevant legislation, including the Corporation Tax Act 2009 and the Corporation Tax Act 2010 (Parts 2 and 3).

Non-resident companies are subject to UK tax only on profits that arise from UK sources. This includes profits generated through a UK permanent establishment, which refers to a branch, office, or any other fixed place of business located in the United Kingdom. In addition, income and gains from UK land or property are taxable regardless of whether the company has a permanent establishment in the UK.

Certain types of income, such as interest, royalties, and branch profits, may be subject to specific withholding tax obligations and branch profit rules. These requirements are set out in the Corporation Tax Act 2010 (Part 5, Chapter 2), the Taxation of Chargeable Gains Act 1992, and the Income Tax Act 2007 (Part 9).

Tax period

Tax returns and assessment

Corporation Tax deadlines for UK companies are determined by the end of the accounting period, which is the date to which financial statements are prepared. After identifying your accounting period end date, you have 12 months from that date to submit your Company Tax Return (CT600). For example, if your accounting period ends on 31 December 2024, your CT600 must be filed by 31 December 2025.

The payment of Corporation Tax is due 9 months and 1 day after the accounting period ends. Using the same example, if your accounting period ends on 31 December 2024, your tax payment deadline will be 1 October 2025.

Advance payments

For UK companies, the method of paying Corporation Tax depends on the level of profits. Companies with profits up to £1.5 million pay their tax in a single payment, due nine months and one day after the end of the accounting period. However, companies with profits above £1.5 million (with thresholds reduced if the company is part of a group) must make advance payments in the form of quarterly instalments.

Standard large companies, whose profits are above £1.5 million but do not exceed £20 million, pay Corporation Tax in four instalments. These are due in the 7th, 10th, 13th, and 16th months following the start of the accounting period. Very large companies, with profits exceeding £20 million, are required to pay in 12 monthly instalments, each falling one month after the start of the accounting period. Companies with profits not exceeding £1.5 million generally make a single payment after the period end.

To calculate each instalment, the company should first estimate its total Corporation Tax liability for the period and divide this by the required number of instalments. Each payment is then made on its due date. The final instalment is adjusted to reflect the actual tax liability once the Company Tax Return (CT600) is filed.

There are further considerations for companies with accounting periods shorter than 12 months, as both the number and timing of instalments are adjusted proportionately. In addition, if a company is part of a group, the relevant profit thresholds for instalment payments are divided between the associated companies to determine their payment obligations.

Deductions

A deductible expense for UK Corporation Tax purposes is any cost that is “wholly and exclusively” incurred in the day-to-day running of your trade. In practice, this means you can generally deduct staff salaries and employer NICs, business-related rent and utilities, office and administration costs (stationery, software, professional fees), marketing and travel expenses (with supporting receipts), repairs that maintain but do not improve assets, training and recruitment fees, and finance costs such as bank charges and qualifying loan interest (subject to the Corporate Interest Restriction rules). These deductions, together with capital allowances on qualifying plant, machinery or fixtures, are offset against your accounting profit to arrive at your taxable profit.

Carry forward of losses

From 1 April 2025 onwards, UK companies may carry forward trading losses indefinitely and set them against future profits of the same trade, subject to the following key rules:

• Automatic offset: After calculating taxable profits (post other reliefs but before capital allowances), any unutilised carried-forward losses automatically reduce those profits in the earliest available period.
• 50% profits cap: For accounting periods beginning on or after 1 April 2025, you can only offset carried-forward losses against up to 50% of your profits that exceed £5 million (the group threshold is £25 million, divided by the number of associated companies) in any one year.
• Group relief: If you belong to a 75%-owned group, you can elect instead to surrender losses to other group members to shelter their profits.
• Separate treatment of capital losses: Capital losses (from asset disposals) must be carried forward and set against future chargeable gains, not trading profits.

These provisions are set out in Corporation Tax Act 2010 (Part 2, Chapter 3), as amended by Finance Act 2016 (introducing the 50% cap) and remain unchanged for periods beginning in 2025.

Withholding tax

Domestic dividend tax

UK companies do not withhold tax on dividend distributions to resident shareholders. Individual recipients pay tax on dividend income above their annual allowance.

The rates for 2025–26 are:

• 8.75% for basic-rate taxpayers
• 33.75% for higher-rate taxpayers
• 39.35% for additional-rate taxpayers

WHT for non-resident companies

The UK does not levy withholding tax on dividends, interest or royalties paid to non-resident companies under domestic law. Amounts paid are gross, although treaty provisions may override this. Recipients must ensure they meet any treaty conditions to benefit from reduced treaty rates.

Dividends paid

All UK dividend distributions to both resident and non-resident corporate shareholders are paid gross with no UK withholding.

Interest

Interest paid by UK borrowers to both resident and non-resident lenders is paid gross with no UK withholding, subject to the requirement that the payment qualifies as “interest” under UK tax law and any relevant treaty definitions.

Royalties

Royalty payments from UK sources to non-resident recipients are paid without UK withholding, provided they fall within the domestic definition; some royalty types may be recharacterized if paid in non-ordinary-course arrangements.

Anti-avoidance rules

The UK applies a range of anti-avoidance measures to counteract tax planning that erodes the UK tax base. Key rules include:

• General Anti-Abuse Rule (GAAR) targeting abusive arrangements
• Disclosure of Tax Avoidance Schemes (DOTAS) requirements
• Targeted anti-hybrid mismatch rules to neutralise hybrid mismatches
• Corporate Interest Restriction limiting interest deductions on high debt levels

Controlled foreign company

UK resident groups must include in their UK tax base certain profits of controlled foreign subsidiaries where profits are artificially diverted. Main features are:

• A gateway test to determine which subsidiaries fall within scope
• Exemptions for genuine commercial activities and low-profit entities
• Specific anti-avoidance rules targeting diverted finance and service profits

Transfer pricing

Any UK entity transacting with associated enterprises on cross-border or UK inland dealings must:

• Apply arm’s-length pricing to goods, services, interest, royalties and intangibles
• Maintain contemporaneous documentation evidencing transfer pricing policies
• Support intra-group allocations of costs and profits with economic analysis

International aspects-double tax treaties

The UK has an extensive network of double tax treaties that:

• Allocate taxing rights between the UK and treaty partner states
• Reduce or eliminate withholding tax on dividends, interest and royalties where treaty criteria are met
• Provide mechanisms for relief from double taxation through credit or exemption methods
• Include tie-breaker rules for individuals’ resident in both jurisdictions

Personal income tax

The personal income tax rates in the United Kingdom are:

• 0% on annual taxable income up to GBP 12,570
• 20% on annual taxable income from GBP 12,571 to GBP 50,270
• 40% on annual taxable income from GBP 50,271 to GBP 150,000
• 45% on annual taxable income over GBP 150,000

Exemption from the taxation

Most UK residents benefit from a personal tax-free allowance and a range of specific reliefs that mean not all income is taxed. In addition, certain groups and types of income are entirely exempt from income tax.

• Personal allowance: the first £12,570 of total income each year is tax-free
• Savings income allowance: up to £1,000 of savings interest (basic-rate taxpayers) or £500 (higher-rate) is tax-free
• Dividend allowance: up to £1,000 of dividend income is tax-free
• Individual savings account (ISA) income: interest, dividends and gains within ISAs are exempt
• Trading and property allowances: up to £1,000 of trading or property income can be received tax-free without a tax return
• Remittance basis for non-domiciled residents: foreign income and gains only taxed if brought into the UK, subject to conditions and potential charge
• Certain state benefits: attendance allowance, disability living allowance, personal independence payment and similar benefits are exempt
• War pensions and armed forces compensation: official compensation payments are exempt
• Employment trivial benefits: small staff gifts or vouchers up to £50 each are exempt subject to conditions
• Non-resident relief: non-UK residents pay tax only on UK source income and gains

Tax period

Deductions

Personal deduction

Every individual resident in the UK is entitled to the personal allowance, which is the amount of income they can receive each tax year without paying income tax. The full allowance applies to most people; it reduces for those whose adjusted net income exceeds £100,000 and is withdrawn entirely once income reaches £125,140.

Other deductible amounts

Individuals can further reduce taxable income by claiming:

• Pension contributions made to registered schemes (subject to annual allowance limits)
• Gift Aid charitable donations (grossed up by basic tax rate)
• Trading and property allowances (up to £1,000 of income each without needing to declare expenses)
• Marriage allowance transfers (married couples or civil partners can transfer £1,260 of allowance)
• Certain professional fees and subscriptions if approved by HMRC

Allowances

Per Diem

Employees who are required to travel away from their normal workplace for business purposes may be granted a daily allowance to cover meals and incidental costs. The allowance can be paid at HMRC scale rates without the need to account for every receipt, provided the employee is on an authorised overnight or extended business trip.

Limits for daily allowance

HMRC benchmark rates for UK travel permit tax-free scale payments of:

• £5 for one meal when the employee is away for at least five hours
• £10 for two meals when away for at least ten hours
• An evening supplement of £15 if work extends beyond 8 pm
• A maximum of £25 in any 24-hour period

Actual costs above these rates may be reimbursed tax-free if supported by receipts and are wholly, exclusively and necessarily incurred.

International aspects  ̶  residence

An individual is treated as a UK resident for a tax year if they meet any of the statutory residence test criteria. Residency is determined by days spent in the UK and by connections (“ties”) to the UK.

• They are automatically resident if they spend 183 days or more in the UK in the tax year
• They are automatically resident if their only home is in the UK and they spend at least 30 days there in the tax year
• They are automatically non-resident if they spend fewer than 16 days in the UK (or fewer than 46 days if not UK resident in any of the previous three tax years)
• If neither automatic test applies, residency is decided by the sufficient ties test, which counts UK ties such as family, work, accommodation, UK visits, and whether the UK is the individual’s main home
• An individual becomes resident if they exceed a threshold number of ties in combination with their days in the UK according to the statutory table

Meeting any of the automatic resident conditions or passing the sufficient ties test means the individual is UK tax resident for the year.

In addition to Corporation Tax, VAT, and Income Tax, there are several other taxes and charges that apply to UK businesses and individuals. These include property transaction taxes, such as Stamp Duty Land Tax in England and Northern Ireland, which ranges from 0 to 15% of the purchase price with payment due within 14 days of completion. Similar taxes exist in Wales (Land Transaction Tax) and Scotland (Land and Buildings Transaction Tax), both with comparable banded rates and deadlines. Business rates for non-domestic properties and council tax for residential properties are also payable through local instalment plans.

Excise and customs duties are levied on goods and imports. Excise duties, reported monthly, cover items like alcohol, tobacco, and hydrocarbon oils, which are taxed at fixed rates per unit or volume. Customs duties are applied at the point of import and vary depending on the type and origin of goods, generally ranging from 0 to over 20%. These are paid either on declaration or through a deferment account.

There are also various transport-related charges. Vehicle Excise Duty, also known as road tax, is based on the vehicle’s type, age, and carbon dioxide emissions. Air Passenger Duty is charged per passenger and depends on the destination, while non-UK hauliers are subject to the HGV Road User Levy.

Additional levies and employer contributions include environmental and regulatory taxes, such as the Climate Change Levy on business energy usage (charged per kilowatt hour), Landfill Tax (charged per tonne at standard or lower rates), and Insurance Premium Tax (12% standard rate, with some exemptions). Employment-related levies include the Apprenticeship Levy, which is 0.5% of a pay bill over £3 million and reported monthly through PAYE, and Employer’s National Insurance Contributions, currently set at 13.8% for earnings above the secondary threshold and paid alongside PAYE.