If you’re planning to form a Limited (Ltd) company in the United Kingdom, it’s important to understand how much tax your business will pay.
One of the biggest advantages of setting up a Ltd company is the structured and transparent tax system the UK offers — but it’s still crucial to know what taxes apply and how much they cost.
So, how much is Ltd company tax in the UK?
Let’s break it down in simple terms.
What Is Ltd Company Tax?
When you form an Ltd company, your business becomes a separate legal entity.
That means your company pays tax on its profits, not you personally — unlike sole traders.
The main tax you’ll pay is Corporation Tax, which is charged on your company’s profits after expenses.
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What Is the Corporation Tax Rate in the UK?
As of now, the Corporation Tax rate in the UK is based on your company’s annual profits.
There are two main rates:
| Profit Range | Corporation Tax Rate | Description |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate (for smaller businesses) |
| Over £250,000 | 25% | Main rate (for larger businesses) |
| Between £50,000–£250,000 | Tapered rate | Gradually increases between 19% and 25% |
✅ Example:
If your company earns £45,000 in profits, you’ll pay 19%, or £8,550 in Corporation Tax.
If your company earns £200,000, you’ll pay a blended rate between 19% and 25%.
How Ltd Company Tax Is Calculated
To calculate your company’s tax, you’ll need to:
- Add up your business income (sales, services, etc.)
- Deduct allowable business expenses (rent, salaries, software, marketing, etc.)
- Calculate your net profit
- Apply the Corporation Tax rate (19–25%)
✅ Tip: You can claim many costs as business expenses, reducing your taxable profit — meaning you pay less tax.
Other Taxes Ltd Companies May Need to Pay
Apart from Corporation Tax, there are a few other taxes that Ltd companies in the UK may need to consider:
1. Value Added Tax (VAT)
If your annual turnover exceeds £90,000, you must register for VAT.
Standard VAT rate: 20%
Even if you earn less, you can register voluntarily to claim VAT back on purchases.
2. Dividend Tax
If you pay yourself dividends as a shareholder, you’ll pay personal Dividend Tax after the annual allowance (£1,000).
- 8.75% (basic rate)
- 33.75% (higher rate)
- 39.35% (additional rate)
3. PAYE (Pay As You Earn)
If you hire employees or pay yourself a salary, you’ll register for PAYE and make National Insurance contributions.
4. Business Rates
If your company operates from a physical office or shop, you might pay business rates, similar to council tax.
How to Reduce Ltd Company Tax
There are several legitimate ways to reduce your tax burden as an Ltd company owner:
- Claim all business expenses – software, internet, travel, and marketing.
- Pay yourself a small salary + dividends – this structure reduces personal tax.
- Contribute to a pension plan – contributions are tax-deductible.
- Use capital allowances – claim for business assets like laptops or equipment.
- Hire an accountant – they’ll help you optimize tax and avoid penalties.
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When Do You Pay Corporation Tax?
You must pay Corporation Tax within 9 months and 1 day after the end of your company’s accounting period.
For example, if your financial year ends on 31 December 2024, you’ll need to pay by 1 October 2025.
You must also file a Corporation Tax return (CT600 form) with HMRC — usually handled by your accountant or formation agent.
How to Pay Ltd Company Tax
Paying your tax is easy and can be done online:
- Through your HMRC business tax account
- By bank transfer, Direct Debit, or online card payment
Always double-check deadlines to avoid fines. Late payments can lead to interest charges.
Example Tax Breakdown
| Annual Profit | Corporation Tax Rate | Tax Payable |
|---|---|---|
| £25,000 | 19% | £4,750 |
| £75,000 | 21.5% (tapered) | £16,125 |
| £150,000 | 23% (tapered) | £34,500 |
| £300,000 | 25% | £75,000 |
As you can see, smaller businesses benefit from lower tax rates, making the UK a competitive location for startups.
Final Thoughts
So, how much is Ltd company tax in the UK?
✅ It ranges from 19% to 25%, depending on your company’s profits.
For small and medium-sized businesses, this system offers fairness, transparency, and flexibility — especially when combined with expense deductions and dividend planning.
If you’re an international entrepreneur, the UK remains one of the most tax-friendly countries for running a Limited company — with clear rules, online management, and global credibility.
To get started, Corpulate.com can help you register your UK Ltd company, set up a business address, and connect you with professional accountants for full tax compliance.
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FAQs:
Between 19% and 25%, depending on the company’s profit level.
Yes. Companies earning under £50,000 pay only 19% Corporation Tax.
Yes, if the company trades or earns profits from UK sources.
Within 9 months and 1 day after your accounting year ends.