Staying on top of corporation tax changes isn’t just about compliance—it’s about securing your company’s financial future. In 2025, UK businesses will continue to face a 25% corporate tax rate, updated R&D relief rules, and tighter digital reporting under Making Tax Digital (MTD). With HMRC enforcing stricter regulations and adjusting tax relief options, failing to stay informed could lead to missed opportunities or costly penalties.
This blog breaks down the key tax updates for 2025, from rate stability and investment incentives to compliance requirements. Understanding these changes will help your business plan ahead, optimize tax benefits, and avoid unnecessary risks.
Corporation Tax Rates in the UK for 2025/26
Understanding corporation tax rates is crucial for financial planning if you own, operate, or manage a company. With the Autumn Budget 2024, tax levels for 2025/26 remain unchanged, but businesses must still ensure compliance with evolving regulations.
Corporate Tax Band | Tax Band Details | Corporate Tax Rate |
Small profits rate | Companies with annual profits under £50,000 | 19% |
Main profits rate (eligible for Marginal Relief) | Companies with annual profits between £50,000 and £250,000 | 19-25% |
Main profits rate (ineligible for Marginal Relief) | Companies with annual profits over £250,000 | 25% |
Read more: When Is The Corporate Tax Filing Deadline 2025?
Understanding the Corporation Tax Landscape in the UK
Overview of Recent Changes
Recent updates have dramatically reshaped the UK tax landscape. The government is working to simplify previously complex rules and make rate changes and thresholds more transparent. This push for clarity is evident in initiatives like the Corporate Tax Roadmap 2024, designed to boost economic growth while reducing uncertainty.
Businesses now face a dynamic environment where staying informed is crucial. As industry experts on Simple Liquidation outlined, firms must quickly adapt to these rapid changes. With the proper guidance and strategic planning, what appears to be a challenge can transform into a valuable opportunity.
Historical Context & Future Trends
Historically, corporation tax rates have reflected the economic climate and shifting government priorities. In earlier decades, changes often lagged behind market realities, causing business uncertainty. MHA Insights highlights how previous reforms sometimes left firms struggling to catch up.
Looking forward, trends indicate a more proactive approach. As detailed by Merranti Accounting, recent adjustments suggest that businesses need to anticipate tighter regulatory oversight and more frequent updates. Embracing these trends early can help companies maintain their competitive edge and ensure long-term financial stability.
What is the UK Corporation Tax Rate?
Corporation Tax is a tax levied on the annual profits of UK-based companies and branches of overseas companies. As of 2025, the Corporation Tax rate remains 25% for companies with taxable profits over £250,000.
Previously, until April 2023, the main Corporation Tax rate was 19%.
Who Pays Corporation Tax?
All UK limited companies must pay Corporation Tax on their annual profits. However, unincorporated organisations may also be liable, including:
- Co-operatives
- Trade and housing associations
- Member’s clubs or associations
Corporate Tax Thresholds
Corporation Tax rates vary depending on the company’s taxable profits:
Profits (£) | Corporation Tax Rate (%) |
0 – 50,000 | 19% (Small Profits Rate) |
50,000 – 250,000 | 19-25% (Marginal Relief applies) |
Above 250,000 | 25% (Main Rate) |
Companies with profits between £50,000 and £250,000 can benefit from Marginal Relief, which gradually increases their tax rate instead of jumping directly to 25%.
Marginal Relief for Corporation Tax
Businesses with profits below £250,000 may qualify for Marginal Relief, allowing them to pay a lower effective tax rate.
- Lower Limit: £50,000
- Upper Limit: £250,000
Marginal Relief creates a sliding tax scale, helping businesses transition smoothly between the 19% Small Profits Rate and the 25% Main Rate.
Who is Responsible for Paying Corporation Tax?
The company director(s) are legally responsible for:
- Filing Corporation Tax returns with HMRC
- Ensuring the correct tax amount is paid on time
Many companies hire accountants to handle tax filings, but the directors’ final responsibility remains.
How to Pay Corporation Tax?
Corporation Tax can be paid through various methods:
- Same-day payments: CHAPS, online banking, or telephone banking
- Standard payments (3 working days processing): BACS transfer, direct debit, debit/credit card payments.
Corporation Tax Deadlines
- Filing Deadline: 12 months after the end of the company’s accounting period
- Payment Deadline: 9 months and 1 day after the accounting period ends
Large companies may need to pay in instalments, with some payments due before the end of the accounting year.
Penalties for Late Corporation Tax Filing
Failure to submit Corporation Tax returns on time results in the following penalties:
Delay | Penalty |
1 day late | £100 |
Over 3 months | Another £100 |
Over 6 months | 10% penalty on unpaid tax |
Over 12 months | Additional 10% penalty |
If a company files late 3 times in a row, the £100 penalties increase to £500.
Penalties for Late Corporation Tax Payments
If Corporation Tax is not paid on time, HMRC may take severe actions, including:
- Charging interest on overdue tax
- Involving debt collection agencies
- Seizing assets or bank accounts
- Pursuing legal action or company liquidation
Companies struggling with payments should contact HMRC immediately to set up a payment plan to avoid penalties.
Read more: How to Avoid Common Tax Filing Mistakes for UK Businesses
Action Point Regularly review your company’s financial projections and tax liabilities to ensure you are well-positioned for any rate adjustments. |
VAT Compliance Integration
While corporation tax changes are grabbing headlines, VAT compliance remains crucial to a company’s financial strategy. Keeping VAT processes aligned with new tax regulations is essential to avoid errors and penalties.
Key Considerations:
- Alignment with New Tax Rules – Businesses must ensure their VAT systems reflect updated tax policies to prevent compliance issues.
- Reducing Audit Risks – Proper record-keeping and accurate reporting help minimize discrepancies, lowering the chances of costly fines.
- Digital Integration – With Making Tax Digital (MTD) now mandatory, companies must use compatible software to streamline VAT submissions.
By proactively managing VAT returns, businesses can avoid unnecessary financial risks and ensure a smooth tax process.
Action Point Consult with tax professionals to seamlessly integrate VAT compliance into your financial strategy. |
Smart Moves to Keep Your Business Tax-Ready
With tax changes taking effect, businesses must act fast to stay compliant and optimize their financial strategy. Here are some practical steps to help you adapt:
✅ Review Your Tax Position
Take a deep dive into your current tax setup, including corporation tax, capital allowances, and VAT compliance. Identify areas where new rules might impact your liabilities and cash flow.
🏢 Consult a Tax Expert
Tax regulations can be tricky, and misinterpretations can be costly. A tax professional can guide you through the changes, helping you take advantage of available reliefs and avoid penalties.
💻 Use Smart Tax Software
Manual calculations increase the risk of errors. Investing in modern tax management software ensures accurate reporting, tracks filing deadlines, and helps with Making Tax Digital (MTD) compliance.
📅 Plan for Future Tax Liabilities
Changes in tax rates and capital allowances may require you to adjust financial forecasts. Planning can help you manage cash flow effectively and avoid surprises.
Taking these steps now will keep your business compliant and position you to benefit from tax-saving opportunities.
Quick Tip Invest in updated accounting software that can handle these new expensing rules automatically. This will ensure accurate reporting and compliance. |
🔍 What to Expect:
- More Frequent Tax Reforms – The government is likely to introduce regular updates to align tax policies with economic needs.
- Stronger Compliance Measures – Expect tighter audits and increased penalties for late or incorrect filings.
- Greater Digital Integration – Making Tax Digital (MTD) will continue expanding, requiring businesses to use digital tools for tax reporting.
- Enhanced Investment Incentives – Policies like full expensing and R&D tax relief are expected to support business growth.
By staying informed and adjusting tax strategies accordingly, businesses can navigate these reforms smoothly and make the most of new opportunities.
Take Control of Your Business Taxes with Confidence
Keeping up with corporation tax changes can be stressful, but you don’t have to do it alone. At Quilliam Marr, we help UK businesses stay compliant, save money, and avoid last-minute surprises. Whether managing new tax rates, maximizing capital allowances, or staying VAT-compliant, we ensure your finances work in your favour.
✅ Smart tax planning to keep more of your profits
✅ Hassle-free compliance so you can focus on growth
✅ Tailored advice from experts who understand your business
Don’t wait until tax season catches up with you. Let’s make tax work for you, not against you! 📞 Call us at +44 7961 090248 or Book a Free Consultation today!
