Corporation tax is paid on any taxable profits accrued by limited companies and some other organisations, including societies and associations.

Sole traders do not pay corporation tax; instead, their profits are treated as regular income. If you are a sole trader or an officer in a partnership, you may want to see our guide to self employed Income Tax.

What is corporation tax charged on?

Corporation tax is levied on taxable profits made by a limited company. Other organisations, including associations and charities, are also liable.

Taxable profits include profit from taxable income, including trading income and investment income (but not dividends), and capital gains. For the purposes of corporation tax, capital gains are known as ‘chargeable gains’.

UK-based businesses must pay corporation tax on taxable profits that they make anywhere in the world.

Paying corporation tax

If you set up a new limited company and begin to trade, you must tell HMRC within three months. You can do this by filling in form CT41G. This is included in the introductory pack that HMRC will send you when they are notified of your new business by Companies House.

You must then complete an annual Corporation Tax Self Assessment. This means that you will work out how much money you owe HMRC by filling in a series of forms. Broadly speaking, your corporation tax liability will depend on your taxable profits, less any deductions. It is possible, for example, to offset capital losses against your corporation tax bill.

When do I have to file and pay?

Companies can set their own accounting periods for corporation tax. These are almost always 12 months long, and generally coincide with the company’s financial year.

Corporation tax is actually due before your annual return. You must pay your corporation tax within 9 months of the end of your company’s accounting period. Your annual return must be filed within 12 months of the end of your company’s accounting period.

Filing your corporation tax return online

As of 1 April 2011 all companies must file their annual returns online. As of 31 March 2010 companies must pay their corporation tax bills electronically.

You can already use HMRC’s online services to file your return and pay your corporation tax quickly. You can access the service by clicking here.