Corporation Tax in 2025: What Every Limited Company Director Needs to Know
Corporation Tax is the tax your limited company pays on its profits. Since April 2023, the rules changed significantly — and many directors across Yorkshire are still paying more than they need to because they have not adapted their tax planning to the new system. Here is everything you need to know.
The New Corporation Tax Rates
Profit LevelRateWhat This MeansUp to £50,00019% (Small Profits Rate)Same as the old flat rate£50,001 – £250,00019–25% (Marginal Relief)Effective rate rises graduallyOver £250,00025% (Main Rate)Full 25% on all profits
💡 What Is Marginal Relief?
If your profits fall between £50,000 and £250,000, you do not simply pay 25% on everything. Instead, marginal relief gradually increases your effective rate from 19% to 25% as your profits rise. Companies with profits just above £50,000 pay far less than the headline 25% rate.
Associated Companies — A Trap Many Directors Miss
The £50,000 and £250,000 thresholds are divided equally between associated companies. If you own or control more than one limited company, the thresholds are split between them. For example, if you have two associated companies, each one's threshold is £25,000 (small profits rate) and £125,000 (main rate).
⚠️ Watch Out
Many directors who set up a second company — for a property portfolio, a side business, or a holding company — are unaware that this immediately halves their Corporation Tax thresholds. This can result in a significantly higher tax bill than expected. Always take advice before setting up additional companies.
Allowances That Can Reduce Your Corporation Tax Bill
Annual Investment Allowance (AIA)
You can deduct the full cost of qualifying plant and machinery — computers, equipment, vehicles — from your profits in the year of purchase, up to £1 million per year. This is one of the most powerful reliefs available to small businesses.
Research and Development (R&D) Tax Relief
If your company is developing new products, processes, or software, you may qualify for R&D tax relief — which allows you to deduct more than 100% of qualifying costs from your taxable profits. Many Yorkshire businesses qualify for R&D relief without realising it.
Pension Contributions
Company pension contributions are a deductible business expense. Paying into a pension through your company reduces your Corporation Tax bill while building your retirement fund — one of the most tax-efficient strategies available to limited company directors.
Directors' Salaries and Dividends
The mix of salary and dividends you take as a director affects both your personal tax bill and your company's Corporation Tax. Getting this balance right — particularly at the new 25% main rate — is more important than ever.
When Is Corporation Tax Due?
Small companies(profits under £1.5 million) — pay Corporation Tax 9 months and 1 day after the end of their accounting period
Large companies(profits over £1.5 million) — pay in quarterly instalments throughout the year
A Company Tax Return (CT600) must be filed with HMRC within 12 months of the end of the accounting period
✅ SAS Tip
Do not wait until your accountant asks for your records to start thinking about Corporation Tax planning. The most effective tax saving strategies — pension contributions, capital expenditure timing, salary and dividend planning — need to be implemented before your accounting year ends, not after. Talk to us well in advance of your year-end date.
How SAS Yorkshire Can Help
Our team prepares Corporation Tax returns for limited companies of all sizes across Yorkshire. We do not just file the numbers — we actively look for reliefs, allowances, and planning opportunities that reduce your bill legally and keep more money in your business.
