Corporation Tax is charged on all taxable profits of UK tax resident companies and on those profits of non-resident companies that are attributable to their carrying on a trade in the UK through a branch. The rates apply to profit, whether income or capital gains. The method by which taxable revenue and deductible expenditure are assessed differs from the rules applicable to individuals.

There are currently two rates of Corporation Tax, depending on the company or organisation's taxable profits:

• the lower rate - known as the 'small profits' rate
• the upper rate - known as the 'full' rate or 'main' rate

There is also a sliding scale between the lower and upper rates known as 'Marginal Relief'.

The rates of corporation tax since 1st April 2023 are as follows:

• The small profits rate of 19% applies where profits are £50,000 or less
• The main rate of 25% applies where profits are over £250,000
• Marginal relief applies to profits between £50,000 and £250,000, tapering out the benefit of the small profits rate
• The £50,000 and £250,000 limits are reduced for accounting periods of less than 12 months and where the company has associated companies (for example, other companies in the same group)
• Different rates apply to ring fence profits (income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf)
• Rates are set each year, so check GOV.UK for the current rates

A special rate of 20% applies to unit trusts and open-ended investment companies. This rate has remained unchanged for several years.

Dividends

The corporation tax liability takes into account the overall profit of the company as well as any dividends that have been made over the period.