Corporation Tax Receipts Pass £100bn, but Growth Is Slowing: What It Means for Your Business

CORPORATION TAX

3K Financial & Accounting Services Ltd  |  Keeping Klient Knowledgeable

Corporation tax receipts reached £100.4bn in 2025-26, up 4% and the first time annual receipts have passed £100bn. But the increase on the previous year’s £96.9bn is only around £3.5bn. The figures are a reminder that raising the main rate to 25% in April 2023 produced a big initial lift, and much less after that.

The numbers at a glance

•     £100.4bn: receipts in 2025-26, compared with £96.9bn the year before.

•     £84.5bn: the total paid before the main rate rose to 25%.

•     £59.9bn: receipts in 2019-20, before the pandemic.

•     £2.92bn: the contribution from businesses with profits under £50,000, which pay the 19% small profits rate.

HMRC itself acknowledges that growth has continued at a slower rate than in recent years, and says it can mainly be attributed to the introduction of the 25% main rate. Other business taxes, such as the residential property developer tax, the energy profits levy and the electricity generator levy, have also added to the total, though growth there has slowed too.

Which sectors pay the most?

•     Financial and insurance: £25.3bn, 27% of the total and up 17% in the year. Over five years this sector’s bill has more than doubled from £12.84bn in 2020-21, reflecting higher taxable profits. The bank levy now raises only £1.44bn a year.

•     Wholesale and retail trade: £9.5bn, down 6%.

•     Professional, scientific and technical activities: £8.6bn.

The questions it raises

The slowdown prompts some difficult questions. Is the rate competitive compared with neighbouring countries and other G7 economies? How much of the plateau is down to a sluggish economy? And how does the low amount paid at the 19% rate sit alongside HMRC’s estimates of a large SME tax gap, the tax lost through error, failure to take reasonable care and deliberate behaviour? With a Budget expected next month, there is pressure on the Chancellor to revisit the 25% rate.

Is complexity the real issue?

Jonathan Hickman, tax partner at BDO, says the rise in receipts has been matched by an increase in complexity. The current system combines a main rate, a small profits rate and marginal relief, which makes things administratively burdensome as companies move between the regimes. He would like to see a phased move to a single rate of 21%, just below the EU average, arguing that it would improve competitiveness, simplify calculations and could encourage businesses to bring investment forward.

What should you do?

Nobody can predict what the Budget will bring, and the rate may stay exactly as it is. What you can control is how well you understand your own position:

1.      Know your band. Companies with profits between £50,000 and £250,000 pay tax under marginal relief, where the effective rate on the extra profit is higher than the headline 25%. Knowing where you sit makes planning easier.

2.      Check for associated companies. The profit limits can be reduced where companies are under common control, which can move you into a higher band sooner than you expect.

3.      Forecast your profits. A mid-year forecast lets us look at timing of investment, pension contributions and other options while there is still time to act.

4.      Keep records tidy. Accurate records lower the risk of errors, which is exactly where HMRC’s attention on the SME tax gap is likely to fall.

We will keep an eye on the Budget announcements and let you know what they mean for your business. In the meantime, if you would like to review your corporation tax position, get in touch.

KEY TAKEAWAYS •     Corporation tax receipts hit £100.4bn in 2025-26, but growth is slowing. •     Financial and insurance firms now pay 27% of the total. •     Complexity and the 25% rate are both in the spotlight ahead of the Budget.