Company Tax Returns or Corporation Tax is a key responsibility for limited companies, and we often advise clients on how to manage it effectively. Since April 2023, the main tax rate stands at 25% for profits over £250,000, while smaller companies with profits under £50,000 pay 19%. Businesses between these figures may qualify f6 aprilor marginal relief.
Unlike personal tax returns, limited companies must submit a Company Tax Return (CT600) that outlines income, expenses, and tax liability. This return must be filed online within 12 months of your accounting period’s end. However, your corporation tax payment is due earlier – just nine months and one day after your year-end.
Staying on top of both deadlines is essential. Miss either, and you risk automatic penalties.
This guide walks you through everything you need to know – from what goes into a CT600 to how to stay compliant and avoid fines.
What is a limited company tax return?
A limited company tax return officially called the CT600, is how your company reports its trading activity to HMRC. Once you receive a notice to deliver a return, you are legally obliged to respond – even if no tax is due. This applies to all registered limited companies in the UK.
Your submission includes:
- The CT600 form
- Statutory annual accounts
- Detailed tax computations
- Any required supplementary pages
These documents must be filed in iXBRL format, HMRC’s standard for digital submissions.
How is it different from a personal tax return?
Company tax returns relate solely to the business entity, which is separate from you as a director. While your company pays Corporation Tax on its profits, you must submit a self-assessment tax return for your personal income, such as salary and dividends.
The two systems differ in allowable expenses, tax rates, and filing rules. Company returns permit deductions only for business-related costs, whereas personal returns follow income tax brackets. Directors often manage both, but they serve very different purposes.
Who needs to file and when?
All UK-registered limited companies must file a Company Tax Return after receiving HMRC’s notice. This is required whether your company makes a profit, breaks even, or records a loss.
You also need to register for Corporation Tax within three months of starting to trade.
Key Deadlines:
- Register for Corporation Tax: Within 3 months of trading
- Pay Corporation Tax: 9 months and 1 day after accounting period ends
- File CT600 and accounts: Within 12 months of the accounting period end
Missing these dates triggers penalties ranging from £100 to 20% or more of unpaid tax
Dormant companies
If your company is dormant (not trading and receiving no income), you don’t need to file a tax return – but you must still inform HMRC and continue submitting accounts and confirmation statements to Companies House.
Filing your tax return: step-by-step
- Gather information: UTR, Gateway login, accounting dates
- Prepare documents: CT600, tax computations, accounts
- Format correctly: Ensure iXBRL for compatibility
- Complete the CT600: Include relevant figures and reliefs
- Submit online: Via HMRC or approved software
HMRC will send a receipt, but this doesn’t confirm approval of your figures.
Avoiding common mistakes
Watch out for:
- Incorrect logins or UTR numbers
- Missing registration deadlines
- Duplicate or late submissions
- Incomplete income reporting
Errors or delays lead to avoidable fines. Corporation Tax must be paid electronically.
How tax is calculated
Taxable profit includes:
- Trading income
- Investment income
- Chargeable gains
- Property income
This differs from your accounting profit. Some items count for one but not the other.
Allowable expenses include:
- Rent, utilities, and office costs
- Staff wages and pensions
- Business travel
- Professional services (accountants, solicitors)
- Marketing costs
Entertainment and personal expenses are not allowable.
Capital allowances and reliefs
You can’t claim full deductions on large purchases outright, but capital allowances let you deduct a portion each year. The Annual Investment Allowance (AIA) currently offers 100% relief on qualifying purchases up to £1 million.
Additional reliefs include:
- R&D tax credits
- Patent Box
- Industry-specific schemes
Penalties for late filing and non-compliance
- Missing deadlines triggers automatic penalties:
- £100: 1 day late
- Additional £100: after 3 months
- 10% of unpaid tax: after 6 months
- Another 10%: after 12 months
Inaccurate returns attract further penalties based on the nature of the error, ranging from 30% to 100% of the tax owed.
How to stay compliant
- Mark deadlines in your calendar
- Submit early where possible
- Hire a professional to ensure accuracy and relief optimisation
- Keep records for at least 6 years
Poor records can result in fines or director disqualification.
How we can help
At Smart Accountants Sussex and Surrey, we support company directors with all aspects of Corporation Tax. From preparing and filing your CT600 to optimising your allowances and avoiding penalties, we’re here to make your tax obligations manageable.
Need help with your return or just want peace of mind? Get in touch for an informal chat about how we can support your business.
Frequently asked questions about limited company tax returns
When does the new tax year begin for limited companies in 2025?
It’s important to note that companies can have their own accounting year-end dates, which may differ from the tax year. Corporation Tax rates and thresholds for the new tax year are typically set out in the Autumn Budget of the previous year, giving business owners time to plan ahead. Always check for any updates from HMRC before the new year starts.
How far back can HMRC investigate?
HMRC can investigate a limited company’s tax affairs for up to 20 years, depending on the nature of the issue. For straightforward, unintentional errors, the standard investigation window is 4 years. If HMRC believes the mistake was careless, this can extend to 6 years, and in cases of deliberate tax evasion or fraud, the investigation can go back the full 20 years. Keeping accurate records and acting transparently can help minimise the risk of deeper investigations.
How can I reduce my Corporation Tax legally?
There are several fully legal ways to reduce your Corporation Tax liability, including:
- Claiming all allowable expenses: This includes business-related costs like rent, salaries, office supplies, travel, and professional services.
- Using the Annual Investment Allowance (AIA): This lets you deduct 100% of qualifying equipment purchases (up to £1 million) from your taxable profits.
- Paying yourself tax-efficiently: Taking a mix of salary and dividends can reduce overall tax liabilities.
- Exploring tax reliefs, such as R&D tax credits for innovation and product development or the Patent Box for income generated from patented inventions.
- An accountant can help you identify all the reliefs your business is entitled to.
How long should tax records be kept?
Limited companies must retain financial and tax-related records for at least six years from the end of the financial year they relate to. However, if your records involve transactions that span multiple accounting periods or if HMRC is conducting a compliance check, it’s advisable to keep them longer. This includes invoices, bank statements, payroll records, receipts, and any documentation used to prepare your CT600 tax return.
What are the Corporation Tax rates for 2025?
As of the 2025 tax year, Corporation Tax in the UK is structured as follows:
- 19% for companies with annual profits of £50,000 or less
- 25% for companies with profits over £250,000
- Marginal Relief applies for profits between £50,001 and £250,000, gradually increasing the effective tax rate between the two thresholds.
- This tiered system aims to ease the burden on smaller businesses while ensuring larger, more profitable companies contribute at a higher rate. Your accountant or tax software can help calculate the exact amount owed based on your profit level.
What are company accounts, and how do they relate to your tax return?
Company accounts are your business’s official financial records, usually including a profit and loss statement, balance sheet, and explanatory notes. These are submitted annually to Companies House and must align with the figures you use in your Corporation Tax Return (CT600). Inaccurate or mismatched accounts can trigger compliance checks from HMRC.
Do I need to pay National Insurance as a limited company director?
Yes, if you’re paying yourself a salary through PAYE, both employer and employee National Insurance Contributions (NICs) may apply. This is separate from Corporation Tax and is reported via your payroll submissions. Dividends, however, are not subject to National Insurance.
Where can I find my Company Registration Number (CRN)?
Your Company Registration Number is issued by Companies House when your business is incorporated. It’s a unique 8-character code (or 2 letters followed by 6 numbers) and appears on your certificate of incorporation. You’ll need it when filing tax returns, accounts or dealing with HMRC and other official bodies.
What is a balance sheet, and why is it important for Corporation Tax?
A balance sheet shows your company’s assets, liabilities, and shareholders’ equity at a specific point in time. It provides a snapshot of your financial position and is included in your annual accounts. While it doesn’t directly affect your Corporation Tax bill, inconsistencies between your balance sheet and tax computations can raise red flags for HMRC.
What happens if I miss a Corporation Tax deadline?
Missing your filing or payment deadlines results in financial penalties. These start at £100 and increase over time, with potential percentage-based fines for continued delays. Repeated failures can also affect your company’s credit rating or trigger a compliance investigation from HMRC.
What is the Government Gateway, and why do I need it?
The Government Gateway is the UK government’s secure login system for online tax services. You’ll need a Government Gateway user ID and password to access your business tax account, file CT600 returns, register for Corporation Tax, and make payments to HMRC. Without it, you won’t be able to meet your filing obligations online.
What accounting software should I use, and how does Xero help with company tax returns?
Xero is one of the most popular cloud-based accounting platforms for UK limited companies. It makes bookkeeping, invoicing, and financial reporting easier, with direct integration to HMRC for seamless digital submissions. Xero supports iXBRL formatting, required for CT600 Corporation Tax filings, and helps you maintain accurate, real-time records. It also simplifies preparing profit and loss statements and ensures you stay compliant with deadlines and the Making Tax Digital rules. Thanks to its user-friendly interface and features designed for UK tax compliance, many accountants strongly recommend Xero.
What happens if my company makes a loss?
If your company records a loss, you may be able to offset it against previous profits (carrying it back) or future profits (carrying it forward), reducing your Corporation Tax bill or even securing a tax refund. It’s essential to report these losses accurately on your CT600 and keep detailed supporting records. Remember, losses also impact your ability to pay dividends, as dividends must come from distributable profits – not from losses.
