Corporation tax financial years and corporation tax rates

For Corporation Tax, the tax year is called the 'financial year' or 'fiscal year' and runs from 1 April to 31 March. This is different from the tax year for individual taxpayers, which runs from 6 April to 5 April.

The Chancellor sets out the rates of Corporation Tax and various allowances, reliefs and credits in the Budget each year (usually in March or April) and also in the Pre-Budget Report the previous November/December. Normally any changes are announced one or more financial years in advance of the year to which they will apply.

Corporation Tax rates

There are currently two rates of Corporation Tax, depending on the company or organisation's taxable profits:

  • the lower rate - known as the 'small profits' rate
  • the upper rate - known as the 'full' rate or 'main' rate

There is also a sliding scale between the lower and upper rates known as 'Marginal Relief'.

This means if your company or organisation's profits are over the lower rate but less than the main rate, the effective rate of Corporation Tax you pay rises gradually from the lower rate to the higher rate depending on your taxable profit.

If your Corporation Tax accounting period doesn't coincide with the Corporation Tax financial year

If your accounting period doesn't run from 1 April to 31 March it spans two Corporation Tax financial years. You'll need to apportion your company's taxable profits between the two financial years on a time basis.

For example, if your company's Corporation Tax accounting period runs from 1 July 2008 to 30 June 2009:

The first nine months (274 days) fall into the 2008-09 Corporation Tax financial year. So you'll pay tax on 274/365ths of your taxable profit at the 2008-09 rates.

The remaining three months (91 days) fall into the 2009-10 financial year. So you'll pay tax on 91/365ths of your taxable profit at the 2009-10 rates.