Trading vs Non‑Trading for Corporation Tax in the UK

Trading vs non-trading vs dormant: the key differences

The main takeaway is that a non-trading company isn’t the same as a dormant one. Both need Companies House filings, but only non-trading companies must submit a Corporation Tax return to HMRC.

Corporation Tax rates: what you’ll actually pay

Getting your status right is only the first step. Knowing the rate you’ll pay comes next. UK Corporation Tax is charged on your company’s taxable profits, which include trading and investment income as well as chargeable gains.

For the current financial year:

• Small profits rate: companies with profits up to £50,000 typically pay a reduced rate of 19%.
• Main rate: companies with profits over £250,000 pay the main rate of 25%.
• Marginal Relief: if your profits fall between £50,000 and £250,000, you can claim Marginal Relief so the effective rate tapers gradually from 19% to 25%.

These thresholds are shared across associated companies and reduced for short accounting periods, so accurate profit calculation matters for trading and non-trading companies alike.

What counts as a trading company for Corporation Tax?

A Trading Company is active, carrying on business with the intention of making a profit, and must file a Company Tax Return (CT600) with HMRC.

HMRC treats your company as trading for Corporation Tax when it’s engaged in general business activity. That includes when your company:

• Sells goods or services with a profit aim
• Operates its main trade or profession
• Receives income such as bank interest or investment gains
• Manages or invests existing assets

Watch out here. HMRC’s definition of trading for Corporation Tax can differ from the tests used for VAT or financial reporting. Always check HMRC’s Corporation Tax guidance specifically, and if you’re unsure how to pay Corporation Tax, read our guide.

What you need to do if your company is trading

1) Register for Corporation Tax

• Register with HMRC within 3 months of becoming active, not from your incorporation date.
• You’ll need your Government Gateway ID, 10-digit UTR, company registration number, trading start date, principal business activity, registered office and contact details.
• Becoming active usually means issuing invoices, accepting payments, buying stock or assets, hiring staff, or advertising with intent to sell.

If you want the full walkthrough, here’s our step-by-step guide on how to register for Corporation Tax.

2) Keep required records

• Maintain bookkeeping records, sales and purchase invoices, payroll records if relevant, bank statements and a chart of accounts.
• Keep records for at least 6 years, longer if transactions span multiple periods.

3) File and pay on time

• File a Company Tax Return (CT600) with HMRC every period, usually 12 months after the accounting period ends.
• Pay Corporation Tax 9 months and 1 day after the period end.
• File statutory accounts with Companies House within 9 months of the period end.
• Consider VAT registration if you pass the VAT threshold, and PAYE registration if you pay staff.

When you submit your Company Tax Return, your accounts and computations must be in iXBRL (Inline eXtensible Business Reporting Language) format.

That’s a technical requirement from HMRC, so you’ll usually need approved accounting software or an accountant to stay compliant.

4) If you can’t register online

Unincorporated associations and some entities can register by post. Include:

• Company or association name and registration number
• UK business address
• Accounting period start date and accounts preparation date
• Nature of business activity
• Names and addresses of office holders
• Parent company details if relevant
• PAYE start date if you have one
• A signed declaration of accuracy

5) Penalties to avoid

• Late registration or late filing can trigger penalties and interest.
• The wrong status creates risk, for example treating a non-trading company as dormant.

What is a non-trading company for Corporation Tax?

A non-trading company isn’t carrying on active trade but may still have some transactions. It might earn bank interest, hold investments, or make a one-off asset sale.

A non-trading company must still file a Company Tax Return with HMRC, plus company accounts with Companies House, even when no Corporation Tax is due.

What is a dormant company for Corporation Tax?

A dormant company is completely inactive. HMRC treats your company as dormant for Corporation Tax when it has no trading activity and no taxable income or chargeable gains.

Typical examples include:

• A newly incorporated company that hasn’t started trading yet
• A company set up to hold an asset such as property or intellectual property, with no income
• A shell company created by a formation agent to sell on
• A defunct business awaiting removal from Companies House

Pre-trading activities like preparing a business plan, registering a website or negotiating contracts don’t count as trading, and you can do them while dormant.

Filing duties:

• Dormant companies don’t file a Corporation Tax return unless HMRC specifically asks.
• You still file dormant accounts and a confirmation statement each year with Companies House.

If your company has stopped trading completely, notify both HMRC and Companies House promptly toavoid late filing penalties.

The two definitions of dormant for Corporation Tax

It’s vital to understand that Companies House and HMRC use slightly different criteria for “dormant”, which is where the confusion usually starts.

Companies House dormancy

A company is dormant if it’s had no significant accounting transactions during the financial year. Only a few transactions are permitted, such as paying Companies House for the annual confirmation statement.

HMRC dormancy for Corporation Tax

Your company is only dormant for HMRC if it isn’t actively trading and has no taxable income or chargeable gains. This is a stricter test. Even a small amount of bank interest or investment income breaks HMRC dormancy and means you must file a CT600, which makes you a non-trading company.

This difference is exactly why a company can be “dormant” to Companies House but a “non-trading company” to HMRC.

Why trading vs non-trading status matters for Corporation Tax

Getting your company’s trading status right helps you avoid fines, missed filings, or paying tax when you don’t need to.

Whether you’re actively trading or genuinely dormant, you have to follow the correct process for your case.

Key filing deadlines for Corporation Tax and Companies House

Knowing your deadlines matters as much as knowing your status. Miss one and you risk fines and interest.

Corporation Tax (HMRC)

• File your Company Tax Return (CT600) within 12 months of the end of your accounting period.
• Pay Corporation Tax within 9 months and 1 day after the end of your accounting period.

Companies House

• File annual accounts within 9 months of your company’s financial year end.
• File a confirmation statement every 12 months.

Worked example

If your accounting period ends on 31 December 2025:

• Corporation Tax payment deadline: 1 October 2026
• Corporation Tax return deadline: 31 December 2026
• Companies House accounts deadline: 30 September 2026