Corporation Tax
Plain-English definition of Corporation Tax — part of our running a business glossary.
Definition
Corporation Tax is the UK tax on Limited company profits — 19% on the first £50,000 of profit, tapering up to 25% on profits above £250,000. Sole traders pay income tax on profits instead, at their personal marginal rate.
Why it matters
Small-business tax is not optional paperwork — it is the structural choice that determines how much of your gross income you actually keep. The gap between a well-structured limited company and a poorly-run sole trader on the same turnover can easily run to five figures per year.
Common mistake
Treating the business bank balance as personal take-home. Retained profit is not the same as disposable income, and dividend tax plus corporation tax is still owed even if the cash is sitting in the company account.
Calculators that use this concept
See also
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- AER (Annual Equivalent Rate) — AER is the savings equivalent of APR — the rate of interest you earn on a savings account assuming interest is…
- SDLT (Stamp Duty Land Tax) — Stamp Duty Land Tax is the UK tax on residential and commercial property purchases in England and Northern Ire…