Companies resident in the United Kingdom are taxed for their global benefits, unless they voluntarily avail themselves of an exclusion clause applicable to permanent establishments located outside the United Kingdom.

For their part, non-resident companies are subject to UK Corporation Tax only in respect of:

• The business benefits attributable to a permanent establishment in the United Kingdom.
• The benefits derived from the exploitation or development of land in the United Kingdom, even if there is no permanent establishment.
• Gains from direct and certain indirect disposition of immovable property located in the United Kingdom.
• The benefits earned from property rental activities in the United Kingdom.

In addition, non-resident companies may be subject to UK Corporate Tax on any other British-sourced income.

In practice, the existence of an extensive network of agreements to avoid double taxation, together with the exemption of dividends, makes the British corporate tax system similar, in many cases, to a system of territorial taxation.

General Types of Corporate Tax in the United Kingdom

As of April 1, 2025, the general rate of Corporation Tax in the United Kingdom remains at 25%, the same percentage applied since the tax year started on April 1, 2024. This rate applies to companies whose taxable profits exceed 250,000 GBP.

For businesses resident in the United Kingdom with profits of less than 50,000 GBP, a reduced rate of 19% applies. For companies whose profits are between 50,000 GBP and 250,000 GBP, a gradual scale of tax rates is used.

When a company is part of a group with associated entities, the thresholds of 50,000 and 250,000 GBP are distributed proportionately among all the companies active in the group worldwide.

The Government has confirmed that both the general rate of 25% and the reduced rate of 19% will be maintained for the fiscal year beginning April 1, 2026.

Patent Box: reduced rate for benefits attributable to patents

In cases where taxable profits can be attributed to the exploitation of patents, a reduced effective tax rate of 10% applies. This regime, known as the Patent Box, not only covers direct royalty income, but also profits from sales of products that incorporate patented technologies, which can represent a significant proportion of total commercial profit.

Pillar Two: International Tax Regulations

The Government of the United Kingdom has incorporated into its national legislation the rules of Pilar Dos of the OECD, aimed at ensuring a global minimum tax for large business groups. These rules apply to groups with annual revenues equal to or greater than 750 million euros, and are implemented through the following key mechanisms:

• Income Inclusion Rule (RIR): Known locally as Multinational Supplemental Tax (MTT), this standard requires large multinational groups based in the United Kingdom to pay a supplementary tax if their foreign subsidiaries are taxed at an effective rate of less than 15%.
• National Minimum Supplemental Tax: Designed as a qualified national supplementary tax (QDMTT), it applies to groups operating in the United Kingdom—even if they don't have an international presence—when their operations in the country generate an effective tax rate of less than 15%.
• Undertaxed Benefits Rule (UTPR): Provides an alternative mechanism for collecting supplementary tax in cases where the RIR is not activated. This tax is allocated between the jurisdictions in which the group operates, based on variables such as the number of employees and tangible assets.
• Transitory Safe Ports: They allow certain low-risk jurisdictions to be temporarily excluded from the scope of the regulations, in order to reduce the administrative burden and complexity of compliance.

Application Schedule

• The RIR and the QDMTT were introduced through the Finance Act (No. 2) of 2023, enacted on July 11, 2023, and are applicable to accounting years beginning on or after December 31, 2023.
• The UTPR was enacted on March 20, 2025, as part of the Finance Act 2025 (FA25), and will take effect for years beginning on or after December 31, 2024.

Although the United Kingdom has sought to align this legislation with the OECD's Pillar Two framework, the technical complexity of the rules and their evolving interpretation could lead to practical differences.

Compliance obligations in the United Kingdom

Entities subject to Pillar Two regulations must meet several requirements for registration, notification and filing with HMRC, even if the supplementary tax is not expected to be paid. In particular:

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HMRC registration

It must be completed on the HMRC online portal within six months after the close of the first accounting period in which the group or entity falls within the scope of application. This procedure cannot be carried out by a tax agent. If the reporting entity is not a tax resident in the United Kingdom, you will need to register with Government Gateway beforehand to obtain a user ID.

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Presentation of the Global Information Statement (GIR)

A Global Information Return must be submitted to HMRC, or a notice of filing abroad if a GIR has already been filed with another tax authority. The deadline is 15 months after the close of each accounting year (extended to 18 months for the first period).

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Declaration of self-assessment and payment of the tax

The entity must file a self-assessment declaration, or a notification below the threshold, and pay the corresponding tax (IMT or DTT) within the same deadline established for the GIR.

Penalties may apply for incorrect or overdue statements, and relevant accounting records are required to be kept for a minimum of nine years, or six months after any open compliance check relating to the corresponding fiscal period.

Special Corporate Tax Regimes in the United Kingdom

Although in general all companies in the United Kingdom are taxed under the same corporate tax framework, there are special regimes applicable to certain strategic sectors or types of business activity. The main ones are highlighted below:

Oil and Gas Sector

Profits earned from oil and gas extraction in the United Kingdom and its continental shelf are subject to a high total tax rate, which can exceed 75%, including:

• 30% standard corporate tax.
• 10% supplementary charge (SCT).
• 38% of Petroleum Income Tax (IPR), effective until 2030.
  

In addition, tax incentives are offered such as deductions of 100% in capital expenditures and 66% for investments in decarbonization. The Energy Security Investment Mechanism (MEI) can change the tax burden if oil and gas prices fall. A new regime is under consultation to replace the EPL starting in 2030.

Life Insurance Companies

These companies are taxed under a specific regime, with special rules for determining benefits and particular tax rates, given the long-term nature of their products.

Tonnage Tax

Alternative to corporate tax for shipping companies operating eligible ships managed from the United Kingdom. The tax base is calculated based on net tonnage. The Finance Act of 2024 expanded access to this regime and increased tax deductions for ship leases.

Banking Sector

Financial institutions are subject to a 3% bank surcharge on profits exceeding £100 million (previously 8%). There are strict limitations on the use of cumulative tax losses.

Real Estate Investment Trusts

Regime designed to promote professional real estate investment. Rental income and certain capital gains are exempt from taxes, as long as they are distributed to shareholders. Distributions are subject to a 20% withholding, except for applicable exceptions.

Qualified Asset Holding Companies

It introduces tax benefits for holding companies owned, at least 70%, by institutional investors or managed funds. Exemptions apply to foreign asset gains, benefits in interest deductions, and tax exemptions on the repurchase of shares.

Tax for Home Developers

Since April 2022, an additional 4% tax has been applied to the profits of companies that develop housing, if they exceed £25 million annually. It applies at the corporate group level and seeks to capture extraordinary revenues derived from the growth of the real estate market.

Income Tax for Non-Resident Companies

Non-resident companies are subject to UK corporate tax in the following cases:

• When they operate through a permanent establishment (EP) in the UK.
• On commercial profits derived from the purchase and sale or development of land in British territory, even without EP.
• For rental income from properties located in the United Kingdom.
• For profits in the direct or indirect sale of British real estate.

In addition, any other British source income (such as interest or royalties) received by a non-resident company is subject to UK income tax at the basic rate of 20%, with no possibility of deductions, unless a treaty relief is applied to avoid double taxation (DTT).

Regime for Non-Resident Landlords

Non-resident businesses that receive rental income in the United Kingdom are subject to the non-resident landlord regime. This regime requires real estate agents or tenants to withhold 20% at the source, unless the gross payment is expressly authorized by HMRC.

Although since April 6, 2020, these incomes have been taxed under corporate income tax (instead of income tax), the NRL's withholding tax regime is still in effect as a fiscal control mechanism.

Recent Legislative Changes and Future of the DPT

The Finance Act of 2022 (FA22) introduced key amendments to reinforce the application of the DPT. Which were: preventing the closure of corporate tax investigations while the DPT review period is open (case Vitol Aviation Ltd), the extension of deadlines for modifying statements within an investigation and the inclusion of the DPT in Mutual Agreement (MAP) procedures in accordance with international tax treaties.

In addition, the government proposes to replace the DPT with a new regime: UTPP (Untaxed Profits Provision). This regulation seeks to:

• Integrate the control of diverted profits within the corporate tax (CT) framework.
• Replace the economic substance test with a Tax Design Condition, which assesses whether the structure seeks to reduce or avoid taxes, even outside the United Kingdom.
• Retain the DPT notification and evaluation process, with adjustments to deadlines and procedures.

The public consultation on this new framework runs until July 7, 2025, and the government plans to incorporate the changes into Finance Act 2025-26, with an estimated entry into force in 2026.

Local Income Taxes

In the United Kingdom, there are no local or provincial income taxes. Direct taxation, including corporate tax and income tax, is managed exclusively at the national level by HMRC, bringing simplicity to the tax system from a territorial point of view.

Special Regime in Northern Ireland

Current legislation provides for the possibility of applying a reduced rate of corporate tax in Northern Ireland, with the aim of promoting investment and competitiveness vis-à-vis the neighboring Republic of Ireland. However:

• An effective date has not yet been confirmed.
• Nor has the tax rate that would be applied been defined with certainty.
• Its implementation will depend on future political and fiscal decisions, including budgetary viability and coordination with the fiscal system of the rest of the United Kingdom.

For now, all companies operating in the United Kingdom—including Northern Ireland—are subject to the general corporate tax rate, unless specific provisions are introduced.