First Year Corporation Tax: What New Limited Companies Need to Know

First Year Corporation Tax: What New Limited Companies Need to Know

Congratulations on forming your limited company. Now comes the part nobody warned you about: corporation tax.

Don't panic. This guide walks you through everything from automatic registration to filing your first CT600. Most of it is simpler than you think.

You're Already Registered

When you incorporate a limited company at Companies House, HMRC is automatically notified. Within a few weeks, you'll receive a CT41G form and a letter containing your:

• UTR (Unique Taxpayer Reference) — a 10-digit number
• Corporation tax payment reference — your UTR plus suffix

You don't need to register separately for corporation tax. It's automatic.

Haven't received your UTR? If it's been more than 4 weeks since incorporation, call HMRC on 0300 200 3410.

Your First Accounting Period

Your first accounting period for corporation tax starts on the date of incorporation and can be up to 18 months long (but only the first one — subsequent periods are maximum 12 months).

Choosing Your Year End

Most companies choose one of:

• 31 March — aligns with the tax year
• 31 December — calendar year
• Your incorporation date anniversary

Your accounting reference date is set when you incorporate. You can change it, but only once in a 5-year period (with some exceptions).

Short First Period

Many accountants recommend a short first period. For example, if you incorporated on 15 July 2025, you might set your first year end to 31 March 2026 (8.5 months). This:

• Gets your first filing out of the way quickly
• Aligns future periods with the tax year
• Simplifies marginal relief calculations

Key Deadlines

Example: Company incorporated 1 May 2025, year end 30 April 2026:

• CT600 due: 30 April 2027
• Tax payment due: 1 February 2027
• CH accounts due: 31 January 2027

The payment deadline is earlier than the filing deadline. This catches many first-time directors off guard. You need to know your tax bill before you can pay it, so don't leave filing to the last minute.

What Tax Rate Will You Pay?

Corporation tax rates for the 2024/25 tax year:

Most new companies fall well within the small profits band and pay just 19%.

Associated Companies

If you or your fellow directors control other limited companies, the £50,000 and £250,000 thresholds are divided by the number of associated companies. Two associated companies? The small profits threshold becomes £25,000 each.

What to Include in Your First CT600

Your CT600 covers:

1. Company information — name, CRN, UTR, accounting period
2. Turnover — total income for the period
3. Trading profit/loss — turnover minus allowable expenses
4. Capital allowances — tax relief on business equipment
5. Tax computation — calculating the actual tax due
6. Declaration — signed by a director

iXBRL Accounts

You must also submit your company accounts in iXBRL (inline XBRL) format. CT600 filing software like Taxpipe generates this automatically from your financial data.

What Counts as a Business Expense?

Common deductible expenses for new companies:

• Pre-trading expenses — costs incurred up to 7 years before trading started (e.g., market research, business planning, legal fees for incorporation)
• Equipment and technology — computers, software, office furniture (claim via AIA)
• Premises — rent, utilities, business rates
• Professional fees — accountants, solicitors, web developers
• Travel — business mileage, public transport, accommodation
• Marketing — website, advertising, business cards
• Insurance — professional indemnity, public liability
• Staff costs — salaries, employer NIC, pension contributions

Dormant Companies

If your company hasn't traded and has no income, you may be able to tell HMRC it's dormant. Dormant companies don't need to file a CT600 (though they still need to file confirmation statements and dormant accounts at Companies House).

To notify HMRC your company is dormant, write to:
Corporation Tax Services, HMRC, BX9 1AX

Or call 0300 200 3410.

Important: "Dormant" for HMRC means no taxable income, no chargeable gains, and no obligation to pay corporation tax. Even bank interest counts as income.

Common First-Year Mistakes

1. Missing the Payment Deadline

Payment is due before the filing deadline. Budget for your tax bill from day one.

2. Not Claiming Pre-Trading Expenses

Expenses incurred before your company started trading are deductible if they would have been deductible had the company been trading. Up to 7 years of pre-trading expenses can be claimed.

3. Forgetting Capital Allowances

If you bought equipment, computers, or vehicles for the business, claim Annual Investment Allowance (AIA). The limit is £1,000,000 — most new companies can write off all equipment costs in year one.

4. Mixing Personal and Business Expenses

Keep clear records. HMRC can disallow expenses that have a personal element. Use a dedicated business bank account.

5. Not Setting Money Aside for Tax

A good rule: put 20% of every invoice payment into a separate savings account for tax. You'll never be caught short.

Filing Your First CT600

You have three options:

1. Hire an accountant — costs £300-500+ for a basic CT600
2. Use HMRC's free service — available until 31 March 2026 only
3. Use filing software — Taxpipe: £59, guided wizard, HMRC-compliant

Taxpipe's wizard walks you through every box, calculates your tax, generates iXBRL accounts, and submits directly to HMRC. No accounting knowledge required.

File your first CT600 → — £59, no subscription needed.

Related Reading

• Filing Your First CT600: A Step-by-Step Guide for New Companies
• Your First Company Tax Return — A New Director's Guide to CT600 Filing
• Dividends vs Salary: The Tax-Efficient Way to Pay Yourself