Contractor Corporation Tax Filing: A Complete UK Guide

Contractor Corporation Tax filing is mandatory for contracting businesses that are active and liable for Corporation Tax.

If you contract through your own limited company, you’ll need to work out its taxable profit, calculate the Corporation Tax due, and meet the relevant payment and filing deadlines.

This guide explains what contractor limited companies need to file, how the tax is calculated, and where the deadlines sit.

Key points

• The tax rate depends on your profits 📊
  Companies with taxable profits of £50,000 or less generally pay Corporation Tax at 19%, while profits above £250,000 are taxed at 25%. Marginal Relief may apply for profits between the two thresholds.
• Know which costs can reduce your taxable profit 🧾
  Salary and employer National Insurance, qualifying pension contributions, eligible capital purchases, and qualifying business travel can all reduce taxable profit. Some costs, such as client entertainment and ordinary commute, can’t be deducted for Corporation Tax.
• Corporation Tax payment and filing have different deadlines 📅
  Corporation Tax is normally due nine months and one day after the end of the accounting period, while the CT600 is due 12 months after year-end. Maintaining up to date books ensures the right figures are ready when each deadline arrives.
• ANNA can automate the Corporation Tax calculation 🚀
  Tracking taxable profit, allowable expenses, and Marginal Relief can be time-consuming, especially when figures change throughout the year. ANNA can calculate your Corporation Tax bill as income and expenses come in, including Marginal Relief where it applies, so you can always keep an eye on your estimated bill.

What Corporation Tax means for a contractor company

Corporation Tax is charged on your company’s taxable profits after allowable expenses and other deductions are taken into account.

For contractors, this usually starts with the income your company receives from clients, minus allowable business expenses, your salary, employer pension contributions, and any other reliefs the company can claim.

This applies regardless of whether your current contract falls inside or outside IR35.

What is IR35?

IR35 is a set of rules used to decide whether you’re self employed through your limited company or effectively working like an employee for tax purposes.

If a contract is ‘inside IR35’, HMRC treats the income as employment-like. Where off-payroll rules apply, the client or agency deducts income tax and employee National Insurance before paying your company. Where they don’t, your company works out the deemed payment.

If a contract is ‘outside IR35’, your company is treated as a normal trading company, and profits are subject to standard Corporation Tax rules.

Why dividends don’t reduce your Corporation Tax bill

Dividends are paid from profits after Corporation Tax has been accounted for, so taking dividends doesn’t reduce your company’s taxable profit.

Changing when you take dividends around your year-end won’t normally affect your Corporation Tax bill, though it can affect your personal tax position.

Registering for Corporation Tax

If your company is new, it needs to register for Corporation Tax with HMRC within three months of starting to trade.

You register online through HMRC using the Unique Taxpayer Reference (UTR) HMRC posts to your company after incorporation.

Missing this deadline doesn't usually trigger an automatic penalty on its own, but it can throw off HMRC's records of your accounting periods, which then creates confusion later when your filing deadlines are calculated.

How Corporation Tax rates and Marginal Relief work

Your Corporation Tax rate depends on your company’s taxable profits. Companies with taxable profits of £50,000 or less pay the Small Profits Rate of 19%, while companies with profits above £250,000 pay the Main Rate of 25%.

If your profits fall between these thresholds, you don’t move straight from 19% to 25%. Instead, Marginal Relief gradually increases the effective rate as your profits rise.

For many one-person contractor companies, taxable profits remain below £50,000 after salary and allowable expenses, meaning the 19% rate applies without any Marginal Relief calculation.

However, it’s worth checking the thresholds if your company has had an unusually strong year or you run another business. The £50,000 and £250,000 limits can be reduced in certain circumstances.

When the Corporation Tax thresholds can be reduced

The £50,000 and £250,000 Corporation Tax thresholds can be reduced if you have associated companies or a shortened accounting period.

If you own or control more than one active company, the thresholds are split between the associated companies. So two associated companies would each have thresholds of £25,000 and £125,000.

This can catch contractors who run a trading company alongside a separate property or investment company. The companies still count as associated even if one has little or no trading activity.

A shortened accounting period can also reduce the thresholds proportionally. If your company closes partway through a year, or its first accounting period is under 12 months, the limits shrink to match.

For example, a six-month accounting period would reduce the thresholds to £25,000 and £125,000. If you also have an associated company, the thresholds can be reduced again.

That means a company with a relatively modest profit can potentially move into the Marginal Relief band when these rules apply.

How Marginal Relief is calculated

Marginal Relief uses a set formula to calculate how much relief your company receives between the £50,000 and £250,000 thresholds. HMRC applies the 25% Main Rate and then deducts the relevant Marginal Relief.

One part of the formula is the standard fraction of 3/200. This is a fixed rate set by HMRC and is used to work out how much Marginal Relief applies.

The calculation also accounts for your taxable profits and augmented profits. Taxable profits are the profits your company is taxed on, while augmented profits can include certain dividends received from companies outside your group.

This means the calculation isn't always based only on the profits your company makes from trading. For example, if your company receives dividends from a separate property or investment company, those dividends could affect the amount of Marginal Relief it receives.

The formula can look complicated, but most accounting software calculates Marginal Relief automatically. Understanding the key figures involved can still help you forecast your Corporation Tax bill during the year.

💡 Did you know?

ANNA’s Auto Accountant calculates your Corporation Tax bill as your income and expenses come in, including Marginal Relief where it applies. This means you can keep track of your estimated liability throughout the year instead of finding out at the end of the year.

Working out your taxable profit

Your Corporation Tax calculation starts with your accounting profit, which is then adjusted for tax purposes.

Several adjustments come up regularly for contractor companies:

• Salary and employer National Insurance: Paying yourself a salary through payroll can reduce your company’s taxable profit, and the employer National Insurance you pay on that salary is deductible too
• Employer pension contributions: Contributions made by your company to your pension can be an allowable business expense, provided they are made wholly and exclusively for the purposes of the business
• Capital purchases: Items such as laptops and office equipment may qualify for the Annual Investment Allowance, allowing your company to deduct the full cost of eligible purchases in the year they are made
• Business travel: Travel costs can be deductible when the journey is for a qualifying business purpose, such as travelling to a temporary workplace or meeting a client

Some costs aren’t deductible even when the company pays for them. Client entertainment, for example, can be a legitimate business expense but can’t be deducted when calculating Corporation Tax. Travel between your home and a single ongoing client site may also be treated as an ordinary commute if the site counts as a permanent workplace.

Getting these adjustments right is an important part of preparing your Corporation Tax return. The CT600 itself is relatively straightforward once you have the correct figures, but those figures depend on accurate bookkeeping throughout the year.

Filing deadlines: When to pay and when to file

Corporation Tax has two separate deadlines:

• Deadline for paying Corporation Tax: Nine months and one day after your accounting period ends
• Deadline for filing your CT600: 12 months after your accounting period ends

For example, if your accounting period ends on 31 March, your Corporation Tax payment is due by 1 January of the following year. You then have until 31 March to file the Company Tax Return.

🧠 Good to know:

Your first accounting period as a new company can run for more than 12 months. When that happens, HMRC splits it into two Corporation Tax accounting periods. You’ll need to file two CT600 returns for your first year, each with its own payment deadline.

How to file your CT600 and what to include

Since 1 April 2026, HMRC’s free Corporation Tax filing service has closed, so you now need to use HMRC-recognised commercial software or have an accountant submit your return.

You need to submit your CT600 with the relevant statutory accounts and Corporation Tax computation in iXBRL format. iXBRL combines human-readable accounts with structured financial data that HMRC’s systems can process automatically.

It’s also important to separate your HMRC filing from your Companies House filing. Although both use the same underlying financial information, they have different requirements:

• Companies House: Statutory accounts (due within nine months of your year-end)
• HMRC: CT600, statutory accounts, and Corporation Tax computation (due within 12 months of your year-end)

What happens if you file your Corporation Tax return late?

A late Corporation Tax return can result in penalties even if your company has no Corporation Tax to pay. HMRC doubled the fixed Corporation Tax late filing penalties in April 2026.

For returns with a filing deadline on or after 1 April 2026, the penalties are:

If your company has filed late in either of the previous two accounting periods, the fixed penalties can increase further, up to £1,000 for the first penalty and £2,000 for the second.

⚠️ Pay attention

If you pay your Corporation Tax late, HMRC can charge interest on top of the late payment penalties. Interest is charged daily on unpaid Corporation Tax from the day after the payment deadline and is currently set at the Bank of England base rate plus 4%.

Should you file CT600 yourself or use an accountant?

Plenty of contractors with straightforward, single-client companies file their own CT600 using commercial software once they understand the adjustments involved.

However, it gets harder with mid-year IR35 status changes, multiple income streams, associated companies, or losses. Directors' loans are also tricky as they need specific supplementary pages on the return.

The rules on what's deductible are specific in places, particularly around travel and subsistence for contractors, so check with an accountant if you’re unsure about a claim. Getting this wrong can trigger an HMRC enquiry into the whole return.

How ANNA helps with your contractor Corporation Tax filing

Contracting is the easy part. It’s the books, the VAT, and the year-end filing that eat your evenings. ANNA takes most of this work off your plate and brings it all into one place so it’s simpler to manage.

Here’s what ANNA has to offer:

• Business account: Open an ANNA business account and manage your company’s money from the same place as your accounting and tax tools
• Auto Accountant: Automatically track income and expenses, keep your books up to date, and calculate your Corporation Tax bill as you go
• Corporation Tax filing: Prepare and file your Corporation Tax return without having to manually work through the calculations yourself
• VAT support: Keep track of VAT and manage your VAT obligations alongside your other business finances
• Free Self Assessment filing: Complete and file your personal Self Assessment tax return, including income from your limited company where relevant
• Smart Pots: Set money aside for upcoming tax bills and other business expenses to avoid being caught short when a payment is due
• Expense tracking: Record and organise business expenses as they happen to keep your accounts accurate and claim the costs your company is entitled to
• 24/7 support: Get help with your business finances whenever you need it

Sign up with ANNA today and simplify your contractor admin.