Need to know if you need to file for Corporation Tax?
Understanding the difference between trading vs non-trading for Corporation Tax is essential if you want to stay compliant and avoid fines.
And let’s face it, HMRC’s definitions can be confusing, especially when “non-trading” and “dormant” are used interchangeably, but the distinctions matter for your tax filings.
In this guide, we’ll break it down in plain terms and show you what you need to do in each case. If you’d rather not wrestle with the details, Sleek’s expert Accounting Services can keep your company on track and compliant.
Trading vs Non-Trading vs Dormant: Key Differences
Status | Transactions Allowed | Corporation Tax Return | Companies House Filing | Filing Deadlines |
Trading | Yes – active business activities such as selling goods, services, or managing assets | Yes – must file a CT600 return and pay Corporation Tax if due | Yes – statutory accounts and confirmation statement | CT return due 12 months after period end; tax due 9 months and 1 day after period end; accounts due 9 months after period end |
Non-Trading | Limited transactions (e.g. bank interest, one-off asset sales) but not carrying on an active trade | Yes – must still file a CT600 even if no Corporation Tax owed | Yes – company accounts and confirmation statement | Same deadlines as trading companies |
Dormant | None – no income, expenses or chargeable gains | No – unless HMRC specifically requests one | Yes – dormant accounts and confirmation statement | Accounts due 9 months after period end |
The main takeaway is that a non-trading company is not the same as a dormant company. Both require Companies House filings, but only non-trading companies need to 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 is next. UK Corporation Tax is levied on your company’s taxable profits, which includes income from trading and investments, 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 exceeding £250,000 are subject to the main rate of 25%.
- Marginal Relief: If your company’s profits fall between £50,000 and £250,000, you may be able to claim Marginal Relief to gradually increase the rate from 19% to 25%.
This progressive structure makes accurate profit calculation essential for all trading and non-trading companies.
What is an active (trading) company?
HMRC treats your company as trading for Corporation Tax purposes when it is engaged in general business activities. That includes if 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
Be aware that HMRC’s definition of trading for Corporation Tax may differ from the tests used for VAT or financial reporting. Always check HMRC’s Corporation Tax guidance specifically, and if you’re unsure of how to pay Corporation Tax, read our article.
What you need to do if your company is trading
1) Register for Corporation Tax
- Register with HMRC within 3 months of becoming active for Corporation Tax, not from the date of incorporation.
- You will need your Government Gateway ID, 10-digit UTR, company registration number, trading start date, principal business activity, registered office, and contact details. If you haven’t already, you can create a Government Gateway Account.
- Becoming active usually means issuing invoices, accepting payments, buying stock or assets, hiring staff, or advertising with intent to sell.
2) Keep required records
- Maintain bookkeeping records, sales and purchase invoices, payroll records if applicable, 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) to 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 to Companies House within 9 months of the period end.
- Consider VAT registration if you pass the VAT threshold, consider PAYE registration if you pay staff.
As an important note, when you submit your Company Tax Return, your company accounts and computations must be in iXBRL (Inline eXtensible Business Reporting Language) format.
This is a technical requirement from HMRC, and you will typically need approved accounting software or an accountant’s service to ensure compliance.
4) If you cannot 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.
Send to HMRC Corporation Tax Services at the published BX9 address.
5) Penalties to avoid
- Late registration or late filing can trigger penalties and interest.
- Wrong status creates risk, for example treating a non-trading company as dormant. This guide covers trading vs non-trading for Corporation Tax so you set the right status from day one.
What is a non-trading company?
A non-trading company is a company that is not carrying on active trade but may still have certain transactions. For example, it might earn bank interest, hold investments, or make one-off asset sales.
Non-trading companies must still file a Company Tax Return with HMRC as well as company accounts with Companies House, even if no Corporation Tax is due.
What is a dormant company?
A dormant company is completely inactive. HMRC considers your company 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 but 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 do not count as trading and can be done while dormant.
Filing duties:
- Dormant companies don’t need to file a Corporation Tax return unless HMRC specifically asks.
- You still need to file dormant accounts and a confirmation statement each year with Companies House.
If your company has ceased trading completely, you must notify both HMRC and Companies House promptly to avoid late filing penalties.
An Important Distinction: Two Definitions of Dormant
It is vital to understand that Companies House and HMRC use slightly different criteria for “dormant,” which is why confusion often arises.
- Companies House Dormancy: A company is dormant if it has had no significant accounting transactions during the financial year. Permitted transactions are few, such as paying a fee to Companies House for an annual confirmation statement.
- HMRC Dormancy for Corporation Tax: Your company is only dormant for HMRC if it is not actively trading and has no taxable income or chargeable gains. This is a stricter test, meaning even a small amount of bank interest or investment income will break HMRC dormancy and require you to file a CT600 (making you a non-trading company).
This difference is the reason a company might be “dormant” to Companies House but be a “non-trading company” to HMRC.
Sleek handles your Corporation Tax so you can focus on what matters.
Why trading VS non-trading for Corporation Tax matters
Getting your company’s trading status right helps you avoid fines, missed filings, or paying tax when it’s unnecessary.
Whether you are actively trading or genuinely dormant you must follow the correct process for either case.
Key filing deadlines for Corporation Tax and Companies House
Knowing your deadlines is just as important 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 2024:
- Corporation Tax payment deadline: 1 October 2025
- Corporation Tax return deadline: 31 December 2025
- Companies House accounts deadline: 30 September 2025
Tip: Even if your company is non-trading or dormant, Companies House still expects accounts and a confirmation statement every year.
Failing to register for Corporation Tax within three months of your accounting period start can lead to fines. HMRC doesn't usually send reminders, so it's up to you to get it sorted.
Trading, non-trading, or dormant? Here’s how Sleek keeps you compliant
Whether your company is trading, dormant or somewhere in between, staying compliant with HMRC doesn’t have to be complicated. At Sleek, we take the stress out of understanding your Corporation Tax obligations.
We’ll help you work out your status, register correctly and stay on track with deadlines, so you can get back to growing your business, not grappling with tax forms.
If you’re unsure what to do next or just want to get it sorted fast, our experts are here to help.
Let Sleek take care of the admin so you don’t have to.
Let Sleek handle your Corporation Tax so you can focus on what matters.
FAQs on trading vs non-trading for Corporation Tax
How do I tell HMRC my company is not trading?
You’ll need to let both HMRC and Companies House know that your company isn’t trading. This makes it officially dormant.
To notify HMRC, use the Tell HMRC your company is dormant portal. You’ll need your Government Gateway ID and your 10-digit UTR number to log in.
Prefer not to deal with the admin? Sleek can handle the whole process for you. Just get in touch.
Can I set up a company but not trade?
Yes. You can incorporate a company without trading. While dormant, you must still file accounts and a confirmation statement with Companies House. HMRC only needs to be informed once you start trading or generating taxable income.
Does a non-trading company need a bank account?
No. A limited company only requires a business bank account once it begins trading. A dormant or non-trading company can exist without one, although some directors open one to separate startup costs.
What is classed as trading for Corporation Tax?
For Corporation Tax, trading means carrying on business activity with the intent to make a profit. Examples include selling goods or services, charging rent, or making gains on assets. Even small amounts of interest or investment income can count as trading for HMRC.
When must I register for Corporation Tax if my company starts trading?
You must register within 3 months of becoming active. Active means trading or receiving income, not simply incorporating. Missing this deadline triggers HMRC penalties, so register as soon as you issue invoices or earn income.
What sort of activities do not count as trading?
Pre-trading activities such as drafting a business plan, designing a website, or sourcing suppliers are not trading in HMRC’s view. You can carry out these tasks while your company is dormant, but the moment you start invoicing or selling, you must register for Corporation Tax.
Is a Company Tax Return the same as a Self Assessment tax return?
No. A Company Tax Return (CT600) is filed by limited companies to report profits and pay Corporation Tax. A Self Assessment return (SA100) is filed by individuals such as sole traders, landlords or company directors to pay personal Income Tax.
