The tax on the profits etc, of companies is called corporation tax which is charged at the present rate of 30%, subject to special relief for companies with profits under £1,500,000. Full corporation tax is now charged both on company profits and its capital gains.

The rate of corporation tax is normally fixed by Parliament in the Finance Act each year for the preceding "financial year". A "financial year" commences on 1 April and runs through to the following 31st March.

Accounting Periods - Corporation tax is charged in respect of accounting periods. These usually coincide with the periods for which the company prepares its annual accounts but cannot exceed 12 months in duration. Thus, if a company prepares accounts for a period of 18 months, the first 12 months will constitute one accounting period and the remaining six months are treated as another accounting period. The actual tax is payable nine months after the end of each accounting period.

Small companies tax rate - The rate is 19% from 1 April 2002. However from 1 April 2000 to 31 March 2006 a 10% starting rate was in operation alongside the full and small companies rates. The small companies rate is charged on the profits of a company with no "associated companies" provided these profits do not exceed £300,000. If the Profits are between £300,000 and £1,500,000 some marginal relief is given.

Starting rate of corporation tax - Beginning with Financial Year 2000, there was a starting rate of tax which applied where a company's profits did not exceed £10,000. The rate for Financial Years 2000 and 2001 was 10% and for years 2002 through to 2005 (31 March 2006) was 0%.