How much tax do limited companies pay?

When you’re deciding the structure of your business you need to take many things into consideration. One of those is deciding if a limited company is the right approach for you. If you’re asking how much tax do limited companies pay, the main tax is corporation tax, charged at 19% for taxable profits of £50,000 or less and 25% for profits over £250,000 for the financial year beginning 1 April 2026, with Marginal Relief applying between those limits. Understanding who pays corporation tax and how large your corporation tax bill might be could impact that decision.

Besides corporation tax, limited companies may also need to pay VAT, employer National Insurance Contributions, and PAYE tax on employee earnings, while directors may have personal tax to consider on salary, dividends, and capital gains. If you own or are setting up a limited company, this guide explains those obligations so you can compare business structures, stay compliant with HMRC, and manage your overall tax liability more effectively.

How much tax do limited companies pay?

UK limited companies generally pay Corporation Tax of between 19% and 25% on their taxable profits. The rate depends on how much profit the company makes:

• 19% small profits rate: for companies with profits of £50,000 or less
• 25% main rate: for companies with profits of more than £250,000
• Marginal Relief: applies to profits between £50,000 and £250,000, gradually increasing the effective Corporation Tax rate between 19% and 25%

These thresholds can be reduced if a company has associated companies or a short accounting period. You can check the current thresholds and rules on GOV.UK’s Corporation Tax rates page.

What other taxes can a limited company pay?

Corporation Tax is not necessarily the only tax a limited company needs to consider. Depending on how the business operates, other taxes can include:

• VAT: Businesses generally need to register for VAT once taxable turnover goes over £90,000 in a rolling 12-month period, or if they expect it to go over £90,000 in the next 30 days. The standard VAT rate is 20%, although some goods and services have different rates.
• Dividend Tax: Shareholders may pay tax personally on dividends they receive above the £500 dividend allowance. For the 2026/27 tax year, dividend tax rates are 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers and 39.35% for additional-rate taxpayers.
• PAYE and National Insurance: These may apply when the company pays salaries to directors or employees.

The amount of tax a limited company and its directors ultimately pay therefore depends on the company’s profits, turnover and how money is taken out of the business.

Overview Of Limited Company Taxes

Tax can be a significant financial cost for businesses, and the specific amount that you will owe to HMRC depends on factors such as your business profits, losses, turnover, payroll and the type of company that you own. To help you to keep on top of the tax payments that limited company owners should be aware of, and to understand how much you should aim to set aside to settle your tax bill each year, we will break down what kind of tax limited companies need to pay below. Our simple overview of the following taxes will leave you free to put your time, effort and energy into building your business and enjoying the fruits of your labour, rather than worrying about tax.

• Corporation Tax
• Value Added Tax (VAT)
• Employer National Insurance Contributions
• Personal tax payments for limited company directors (you may need to pay personal tax depending on the income you receive)

What Is Corporation Tax?

Corporation tax is the main tax that limited companies need to pay on their taxable profits. Unlike sole traders, limited companies do not pay Income Tax on their business profits, but they can still have National Insurance obligations as employers.

Instead, the company pays Corporation Tax on its taxable profits after allowable deductions and reliefs. Corporation Tax is applied to limited company taxable profits after salaries and other allowable business expenses have been taken into account, but before dividends are paid from available profits. A limited company must pay Corporation Tax when it has taxable profits and a Corporation Tax liability.

How Much Corporation Tax Will I Pay?

The current Corporation Tax rates for the financial year beginning 1 April 2026 are 19% to 25% depending on taxable profits. What that percentage actually equates to in money owed to HMRC by your business will depend on the company’s taxable profits for its accounting period. You can find the current rate of Corporation Tax on the GOV.UK website: Corporation Tax rates and allowances.

If at the end of the tax year your limited company has earned £300,000 and accumulated allowable expenses of £30,000, the business profits would sit at £270,000. 25% corporation tax rate would be paid on the full amount, as corporation tax does not operate on progressive bands like income tax. Total tax bill = £67,500

How Do I Pay Corporation Tax And When Is It Due?

A limited company must submit a corporation tax return to HMRC when it has been issued with a notice to deliver a Company Tax Return. The return uses form CT600 and companies generally calculate their own Corporation Tax liability as part of it. The filing deadline is normally 12 months after the accounting period, while payment is normally due 9 months and 1 day after the end of the accounting period for companies with taxable profits up to £1.5 million. Larger companies can have installment-payment rules.

The total Corporation Tax that you owe must normally be paid no later than nine months and one day after the end of your company’s accounting period if the company is not subject to the large-company instalment rules. Limited companies have an accounting reference date, which will normally continue from year to year but can be changed subject to Companies House rules.

The corporate tax owed can be paid online via your HMRC account using a company credit card, business bank account or direct debit. Paying early can earn interest from HMRC, while unpaid tax will incur interest charged by HMRC on late payments.

For Company Tax Returns with a filing date on or after 1 April 2026, late-filing penalties start at £200 after one day and a further £200 applies after three months. If the return is six months late, HMRC can estimate the Corporation Tax bill and add a penalty of 10% of unpaid tax, with further penalties for longer delays. Separate penalties can apply to inaccurate returns depending on the circumstances and the tax lost.

What Is VAT?

VAT is another tax that some limited companies have to account for. VAT stands for Value Added Tax and it is a charge added to the price of many goods and services in the UK. When companies are VAT registered it means that they must charge VAT where applicable to their customers but can also reclaim eligible VAT that they have paid on qualifying business expenses and purchases.

When Should I Register For VAT?

You must normally register for VAT if your taxable turnover for the previous 12 months exceeds £90,000, or if you expect your taxable turnover to exceed £90,000 within the next 30 days.

Businesses can choose to register voluntarily for VAT even if they are below the compulsory registration threshold. There are also several VAT schemes available, including the Flat Rate Scheme, Annual Accounting Scheme and Cash Accounting Scheme, subject to their eligibility rules. As not all businesses should register or account for VAT in the same way, an accountant can help if you are close to the threshold or choosing a scheme, and confirm which option is best suited to your company and its finances.

How Do I Pay VAT And When Is It Due?

VAT-registered companies usually submit a VAT Return every three months, although different arrangements apply under schemes such as Annual Accounting. The standard deadline for submitting a VAT Return and paying money owed to HMRC is normally one calendar month and 7 days after the end of the VAT accounting period. A VAT-registered business must still submit a VAT Return even if it has no VAT to pay or reclaim for that period.

Your VAT bill will generally be based on the VAT due on your sales minus the VAT you are entitled to reclaim on eligible business purchases. The balance is the amount of VAT owed to HMRC, although not all VAT incurred by a business is necessarily reclaimable. To understand how much VAT to charge on goods and services and what VAT can be reclaimed on business purchases, HMRC has guidance on charging, reclaiming and recording VAT. Knowing these calculations will be invaluable for keeping accurate income and expenditure records for the business accounts.

Employers National Insurance Contributions

There are several different types of National Insurance payments depending on whether you’re an employee, sole trader or company director. We cover employer contributions here and director contributions later in the article. Employers are required to pay National Insurance Contributions on their employees’ earnings and benefits as well as being responsible for collecting employees’ Class 1 National Insurance contributions and income tax deductions through their PAYE system.

If you operate a limited company with staff on its payroll, you will need to pay ‘secondary’ class 1 National Insurance Contributions on your employees earnings. Primary contributions are deducted from the employee’s pay at source through PAYE. For 2026/27, the standard employer NIC rate is 15%, with a secondary threshold of £5,000 per year. Eligible employers may also claim Employment Allowance of up to £10,500. Eligible companies may also be able to claim Employment Allowance to reduce their employer NIC bill, although not all businesses qualify.

Check the latest NIC rates. Employer NICs are also payable on some employee benefits, while qualifying business expenses can be exempt from tax and NICs if the relevant conditions are met. This can include certain business travel and subsistence costs and qualifying professional subscriptions, while the rules for entertainment expenses depend on the type of entertainment and how it is provided or reimbursed. Where limited companies provide taxable expenses or benefits, the reporting and National Insurance treatment depends on the type of benefit and whether it is being payrolled. Some benefits can be taxed through payroll if the employer is registered to payroll them, while others may need to be reported on a P11D, and Class 1A National Insurance can still be due.

Personal Tax Payments For Limited Company Directors

A limited company pays Corporation Tax on taxable company profits and may also have VAT and Employer National Insurance obligations, while directors can have personal tax liabilities on salary, dividends and other personal income. In order to build up a full picture of the amount of tax limited companies and their directors pay, company directors should consider both the business and personal streams of tax that may apply in any given accounting or tax year, including what the company pays and what remains the director’s personal tax liability. Personal tax payments include:

• Income Tax
• Dividend Tax
• National Insurance Contributions
• Capital Gains Tax

Income Tax For Company Directors

As a company director, you need to be aware that Income Tax may be due on income you personally receive, including salary, dividends and rental income. Dividends are taxed using separate dividend tax rates rather than the ordinary rates that apply to salary. If you are taking a salary through payroll, Income Tax depends on your taxable income and tax code rather than simply your salary alone.

For 2026/27 the standard Personal Allowance and employee National Insurance primary threshold are £12,570, while the employer National Insurance secondary threshold is £5,000. Where tax and employee National Insurance are due, they are generally deducted through PAYE, while the company also accounts for any employer National Insurance due.

Dividend Payments

A dividend is a share of a company’s profits paid to its shareholders. Dividend Tax is a personal tax on the shareholder, separate from Corporation Tax paid by the company. If you have tax to pay on dividends, you must report this to HMRC. How you report it depends on the amount of dividend income you receive and whether you already complete a Self Assessment tax return.

Tax Free Allowances And How Much You Pay

Company shareholders do not pay tax on dividend income that is covered by any available Personal Allowance, and there is also a tax-free dividend allowance. For 2026/27 the dividend allowance is £500. Tax may therefore be due on dividend income above the allowances available to you, depending on your wider income and tax band. The actual amount of tax you will need to pay on dividends depends on your tax band and the allowances available to you. Your tax band is determined by your total taxable income, not just your salary and dividends, and dividend income is added on top of your other income when working out which dividend tax rate applies. Find out more about income tax and dividend thresholds.

How And When Do I Pay Personal Tax Owed?

Where Self Assessment is required, the normal deadline for filing an online return and paying any balancing tax due is 31 January following the end of the tax year. Being a company director or shareholder does not by itself mean that you must always file a Self Assessment return, as this depends on your income and circumstances.

Company owners should also be aware that payments on account may be required in some cases. A payment on account is an advance payment towards your next Self Assessment tax bill. Payments on account are normally made in two instalments, each usually equal to half of the previous year’s relevant tax liability. They are generally not required if the previous year’s tax due through Self Assessment was less than £1,000 or if more than 80% of the tax was already collected outside Self Assessment.

What Are The Benefits Of A Limited Company?

A limited company can provide entrepreneurs with several advantages, such as:

1. Liability protection: A limited company structure generally separates the company’s debts and liabilities from those of its shareholders. However, personal liability can still arise in some circumstances. For example, if a director gives a personal guarantee or secures company borrowing against a personal asset, that personal asset can be at risk if the company cannot repay the debt.
2. Tax planning: A limited company structure can provide options for managing how profits are retained or paid out, while still complying with HMRC rules. Some forms of tax relief can reduce your corporation tax or provide other tax benefits. Qualifying research and development activity may be eligible for the merged R&D expenditure credit scheme or Enhanced R&D Intensive Support, depending on the company and accounting period. Qualifying charitable donations can also usually be deducted when calculating taxable profits.
3. Brand recognition: A limited company has a certain level of prestige associated with it compared to other business structures. This may make it easier for the company to attract customers, partners and investors.
4. Funding potential: It is often easier for a limited company to secure funding from banks, venture capitalists and other sources, as the structure is seen as more reliable and secure.
5. Perpetual existence: A limited company exists until it is dissolved, regardless of whether its directors or shareholders change over time. This can provide a level of continuity to a business that other structures may not offer.
6. Separate legal personality: A limited company is seen as a separate legal entity by the law, and therefore can have its own assets, employees and liabilities. This makes it easier to protect personal assets from any debts incurred by the company.

Do I Need An Accountant To Set Up A Limited Company?

Many limited companies choose to use an accountant to help manage payroll, annual accounts, accounting records and tax obligations, but appointing an accountant is not generally a legal requirement. Ultimately, the decision on whether to hire an accountant or not is yours. This will likely depend on how comfortable you are meeting the reporting needs of HMRC on top of your day job. Like any business decision it’s important to weigh up the cost of hiring an accountant vs the benefit they offer.

Due to the accurate and extensive records that you are legally required to keep as a limited company owner and the time this can take, you may decide that hiring an accountant would be beneficial. Accountants can speak to HMRC on your behalf so if you’re looking to save time, enjoy the benefits of tax efficiency and ensure employee pay is handled correctly then you may find it easier to outsource your accounting needs to a qualified accountant. For more complex situations, professional advice can help you avoid filing mistakes and penalties.

What Is A Public Limited Company?

A public limited company (PLC) is a type of business entity that has the right to offer shares to the general public. It is formed by registering with Companies House and must comply with certain legal requirements set out in the Companies Act 2006. It can be either an existing private limited company which has decided to “go public” or a new company specifically formed for the purpose of going public. Public limited companies typically have a higher level of regulation than private limited companies and must disclose certain financial information for shareholders to review.

How To Register A Company In The UK

If you’re looking to operate through a limited company in the United Kingdom, the company must be incorporated through Companies House before it starts trading. Once a new company becomes active for Corporation Tax, it must tell HMRC within three months of starting its tax accounting period. This Corporation Tax registration is separate from the company’s incorporation. To register for Corporation Tax, you will need details including your company registration number and the date the company became active. Companies House is the UK’s registrar of companies, while Corporation Tax is administered by HMRC.

How much Tax Do Limited Companies Pay In The UK: Summary

Corporation Tax, VAT and Employer National Insurance Contributions are among the main taxes that can apply to limited companies, depending on how the business operates. Directors and shareholders may also have personal tax obligations on top of this, but they only need to submit a Self Assessment tax return where the Self Assessment rules require one. The specific amount of tax your limited company and its directors or shareholders will pay will depend on factors such as business turnover, taxable profits, expenses, payroll and how money is taken from the company. For some businesses the final figure can also be affected by capital allowances, other reliefs and losses carried forward against future profits, but it’s important to stay on top of your tax obligations whilst considering tax efficiency, which is where a qualified accountant can be useful. Foreign companies with a UK branch may also have Corporation Tax obligations here, and Corporation Tax rules can also apply to some clubs, societies and unincorporated associations.