A small limited company's corporation tax position is simpler than the guidance around it suggests. There is one rate that applies below £50,000 of profit, one that applies above £250,000, and a relief in between. Almost everything else that is written about corporation tax concerns companies larger than that, and a small company can safely ignore most of it once it knows which of the three thresholds it is near.
The rate a small company actually pays
At £50,000 of taxable profit or less, the small profits rate of 19% applies. That covers a large share of owner-managed companies outright. Between £50,000 and £250,000, the main rate of 25% is charged and Marginal Relief is deducted, so the effective rate climbs through the band. Only above £250,000 does the full 25% apply. Before checking which band applies, divide both thresholds by the number of associated companies, because a founder who holds two or three companies is often in a higher band than the profit figure alone suggests.
Which reliefs are worth the effort at this size
Capital allowances almost always are: they are claimed in the return, need no separate application, and the annual investment allowance covers most small companies' plant and machinery spend in full in the year of purchase. R&D relief is worth investigating if the company genuinely resolved a technical uncertainty, but the fees are the consideration at small claim sizes, because every firm in this site's fee record that publishes a percentage also publishes a minimum, and on a small benefit the minimum is what you pay. Patent box is rarely worth it below a substantial patented income stream.
The dates that matter more than the rate
For a small company the deadlines cause more trouble than the arithmetic. Corporation tax is due nine months and one day after the end of the accounting period. The company tax return is due three months after that, twelve months from the period end. Late filing starts at £200 after a single day and escalates, and repeated lateness raises those fixed penalties to £1,000 each. Interest on late payment runs from the day after the due date. None of that is discretionary and all of it is avoidable with two calendar entries.
Questions people ask about corporation tax for small businesses
How much corporation tax does a small business pay?
19% on taxable profits of £50,000 or less. Between £50,000 and £250,000 the 25% main rate applies with Marginal Relief deducted, which gives an effective rate between the two.
Is R&D relief worth claiming for a small company?
It depends on the size of the benefit against the fee. Every firm in this site's fee record that publishes a percentage also publishes a minimum fee, and on a small claim the minimum, not the percentage, is what the company pays.
What are the penalties for filing a small company's return late?
£200 one day after the deadline, another £200 at three months, an HMRC estimate plus 10% of the unpaid tax at six months and another 10% at twelve months. Three late returns in a row raise the £200 penalties to £1,000 each.