What is corporation tax?
Corporation tax is the tax UK companies pay on their profits. The main rate is 25% for companies with profits over £250,000. Companies with profits under £50,000 pay a small profits rate of 19%. Those in between pay a rate that rises gradually between the two.
Corporation tax is charged on a company's taxable profits, which include trading profits, investment income and gains. Firms can deduct business costs and claim allowances for investment. Since 2023 full expensing has let companies deduct the whole cost of qualifying plant and machinery in the year they buy it. This encourages investment. Research and development reliefs also cut bills for innovative firms of all sizes.
The main rate rose from 19% to 25% in April 2023. The current government has promised to keep it capped at 25% for this Parliament, giving firms some certainty. It remains among the lowest headline rates in the G7. Oil and gas companies pay extra under a separate regime, and banks pay an extra surcharge on large profits. Smaller firms pay less.
Corporation tax is one of the government's biggest revenue sources. Economists disagree about who really bears it. Part falls on shareholders, but some evidence suggests workers also pay through lower wages and customers through higher prices. Because big firms can move profits across borders, the UK has signed up to a global minimum rate of 15% for large multinationals. This applies from 2024.
Who it affects: Companies with profits over £250,000
The left often argues large, profitable firms should pay more, and that past cuts mainly benefited shareholders.
The right often argues lower corporation tax attracts investment and jobs, and that the 2023 rise made the UK less competitive.
Britain is split. Now you decide.
In WeDecide you can raise or cut corporation tax in your Budget and see how investment, growth and revenue respond.
Play WeDecide freeCommon questions
What is the UK corporation tax rate?
The main rate is 25%, with a 19% small profits rate for profits under £50,000.
When do companies pay corporation tax?
Most pay nine months and one day after the end of their accounting period.
Do sole traders pay corporation tax?
No. Sole traders pay income tax and National Insurance on their profits instead.