How is a limited company taxed?

Corporation Tax

The company pays 19% Corporation Tax on profits up to £50,000 and 25% on profits above £250,000; in between, marginal relief gradually raises the effective rate. The thresholds are reduced if there are associated companies or the accounting period is shorter than 12 months. You register for Corporation Tax within three months of starting to do business, pay nine months and one day after the end of the accounting period and file the return (CT600) within twelve months.

Salary or dividends? – the biggest lever

As a director you can take a salary, which is deductible for the company but subject to PAYE and National Insurance, or dividends from profits after Corporation Tax. For 2026/27 the dividend allowance is £500; above it, dividends are taxed at 10.75% (basic rate), 35.75% (higher rate) and 39.35% (additional rate).

Employer National Insurance is 15% on salaries above £5,000 a year. The Employment Allowance of £10,500 reduces it, but is not available if a director is the only employee paid above that threshold. The best mix depends on your situation – work it out with an accountant.

VAT – and planning with planix

A company must register for VAT once its taxable turnover exceeds £90,000 in a rolling 12-month period or is expected to exceed it in the next 30 days alone. VAT-registered businesses keep digital records and file returns using Making Tax Digital compatible software. planix includes Corporation Tax and VAT in your financial plan so you see early what is left for you.