Corporation Tax and Self Assessment are two different tax systems for two different kinds of taxpayer. Corporation Tax is what a UK limited company pays on its profits, reported on a CT600 return at rates between 19% and 25%. Self Assessment is how an individual reports and pays income tax on earnings that weren’t fully taxed at source, using an SA100 return with income tax charged in bands from 20% upward. If you run a limited company and take dividends from it, you deal with both.
Which System Applies to You
A limited company is a separate legal person, so it owes its own tax. It files a CT600 and pays Corporation Tax on its profits. A sole trader or a partner in a partnership has no such separation: everything they earn is personal income, reported through Self Assessment.
You need to file a Self Assessment return for a tax year if any of these applied:
- You earned more than £1,000 as a sole trader before expenses
- You were a partner in a business partnership (profits are taxed on each partner personally, not on the partnership itself)
- You received rental income from letting property
- You owed Capital Gains Tax on the sale or disposal of an asset
- You received dividends or other untaxed investment income above your allowances
- You earned over £60,000 and your household claimed Child Benefit
Company directors sit across both systems. Running a limited company doesn’t exempt you from Self Assessment. If you take dividends from the company, or have any other untaxed income, you file an SA100 in your own name as well as a CT600 for the company. Even a director whose salary is fully taxed through PAYE must file personally once dividends are involved.
What Each System Taxes, and at What Rate
Corporation Tax
Companies pay Corporation Tax on taxable profits after allowable business expenses and capital allowances. There is no personal allowance or tax-free band. For financial years from 1 April 2023 onward:
- Small profits rate of 19% on annual profits under £50,000
- Main rate of 25% on annual profits above £250,000
- Marginal relief for profits between £50,000 and £250,000, which reduces the main rate on a sliding scale rather than applying a cliff edge
The £50,000 and £250,000 thresholds are divided by the number of associated companies. If you control two connected companies, each gets half the limits.
Income Tax Through Self Assessment
Individuals pay income tax only on earnings above the Personal Allowance, which is £12,570 for the 2025/26 tax year. Above that, income falls into progressive bands in England, Wales, and Northern Ireland:
- Basic rate of 20% on taxable income from £12,571 to £50,270
- Higher rate of 40% from £50,271 to £125,140
- Additional rate of 45% above £125,140
Taxable income adds together wages, self-employment profits, rental income, and investment returns. The Personal Allowance tapers away once total income exceeds £100,000 and disappears entirely at £125,140. Scotland sets its own rates and bands.
Dividends: Where the Two Systems Meet
Dividends are taxed twice, in effect. The company pays Corporation Tax on the profits it distributes, and the shareholder then pays dividend tax on what they receive. Dividend rates sit below the standard income tax bands to partially account for the Corporation Tax already paid. The first £500 of dividend income is covered by the dividend allowance. Above that:
- 8.75% for basic-rate taxpayers
- 33.75% for higher-rate taxpayers
- 39.35% for additional-rate taxpayers
For an owner-director, the company’s CT600 reports the profits and the director’s SA100 reports the dividends. Getting the split between salary and dividends right is one of the central planning decisions for anyone running a limited company.
Filing and Payment Deadlines
Corporation Tax
A company files its CT600 within 12 months of the end of its accounting period. The accounting period is usually the company’s financial year and doesn’t have to match the calendar year or the government’s fiscal year. A company with a year-end of 31 March 2026 must file by 31 March 2027.
Payment comes first. Corporation Tax is due nine months and one day after the end of the accounting period, so a company with a 31 March 2026 year-end must pay by 1 January 2027, three months before the CT600 itself is due. Businesses that don’t estimate their liability early can get caught out. HMRC charges interest on late payments at 7.75% as of January 2026.
Self Assessment
The tax year runs from 6 April to 5 April. For 2025/26:
- Paper returns are due 31 October 2026
- Online returns are due 31 January 2027
Most people file online for the extra three months. The balancing payment for the year is also due 31 January.
If your Self Assessment bill exceeds £1,000 and less than 80% of your total tax was collected through PAYE, HMRC requires payments on account. Each one is half of the previous year’s tax bill: the first is due 31 January (alongside the balancing payment for the prior year), the second on 31 July. If your income drops you can apply to reduce them; if it rises, you’ll owe a balancing payment the following January. The January deadline is where the pressure lands, because you’re paying last year’s balance and this year’s first instalment on the same date.
Penalties If You Miss a Deadline
Corporation Tax
Late filing of a CT600 triggers escalating penalties:
- £100 if the return is one day late
- Another £100 at three months late
- 10% of the unpaid tax at six months late, with HMRC estimating the bill
- A further 10% of the unpaid tax at 12 months late
Three consecutive late filings push the flat £100 penalties up to £500 each. Late payment of the tax itself accrues interest but, for most companies, no separate late payment penalty.
Self Assessment
The Self Assessment regime ramps up harder, and applies whether or not tax is actually due:
- £100 as soon as the return is one day late
- £10 per day from three months late, for up to 90 days, adding up to £900
- 5% of the tax due or £300, whichever is greater, at six months late
- Another 5% of the tax due or £300 at 12 months late
A sole trader who files a year late with a £5,000 tax bill could face over £1,600 in penalties on top of the tax and interest. The daily penalties from the three-month mark are where most of the damage builds up.
National Insurance: A Big Cost Difference
Self-employed people filing through Self Assessment pay Class 4 National Insurance on their profits. For 2025/26:
- 6% on profits between £12,570 and £50,270
- 2% on profits above £50,270
Class 2 contributions are treated as paid automatically once profits exceed £6,845, protecting state pension entitlement without an actual payment. Below that, you can pay Class 2 voluntarily at £3.50 per week.
A company director pays employee National Insurance only on salary, not on dividends. This is one of the main financial reasons people incorporate. A sole trader earning £60,000 in profit pays Class 4 NI on almost all of it. A director taking a small salary with the rest as dividends pays significantly less overall.
New Disclosure Rules for Directors from 2025/26
From the 2025/26 tax year, directors of close companies face new reporting on their Self Assessment return. A close company is one controlled by its directors or by five or fewer shareholders, which covers most owner-managed businesses. On the SA102 employment pages, directors must now disclose:
- The name and registration number of each close company they direct
- The dividend income received from each close company, even if the amount is zero
- The percentage of share capital held in each close company, even if zero
HMRC is tightening its ability to cross-reference what a company reports on its CT600 against what its director declares on the SA100. Any mismatch between the dividend figure on the company return and the director’s personal return is now much easier to spot. Keeping clean records of every distribution throughout the year is the practical way to avoid an enquiry.