How much corporation tax does a limited company pay on £40,000 profit?

A limited company with £40,000 taxable profit pays approximately ££4,996 corporation tax in 2026/27, at an effective corporation tax rate of 19.0%. This is after deducting a director salary of £12,570 and ££1,136 employer NI from gross profit.

What is the director take-home pay on £40,000 company profit?

Taking a £12,570 salary and all available post-tax profit as dividends, the director's personal take-home is ££31,633 per year (££2,636 per month) in 2026/27. This assumes England/Wales tax rates, no other personal income and no pension contributions.

What is the effective tax rate for a £40,000 limited company?

The combined effective tax rate — covering employer NI, corporation tax, income tax and dividend tax — is 20.92% on £40,000 of company profit in 2026/27.

Is it worth running a limited company at £40,000 profit?

At £40,000 profit, total tax across all sources is approximately ££8,367. As a sole trader at the same profit level, you would pay income tax plus Class 4 NI, which at this level typically means a higher combined rate. The limited company advantage depends on what you need to extract and your accountancy costs.

Limited Company Tax on £40,000 Profit (2026/27)

On £40,000 company profit, the director takes home ££31,633/year (££2,636/month) in 2026/27, paying ££4,996 corporation tax and ££8,367 in total across all taxes. Assumes £12,570 director salary, England/Wales rates, all post-tax profit taken as dividends.

Open in calculator Guides Salary vs dividends Corporation tax rates

Corporation tax

£4,996

19.0% effective

Director take-home

£31,633

£2,636/month

Total tax

£8,367

all sources

Effective rate

20.92%

of gross profit

Full tax breakdown

Item	Amount	Note
Gross company profit	£40,000
Director salary	−£12,570	deductible
Employer NI	−£1,136	15% on salary above £5,000
Taxable profit	£26,294
Corporation tax	−£4,996	19.0% effective
Post-tax profit (= dividends available)	£21,299
Director salary (personal)	£12,570
Personal tax on salary	−£0 IT / −£0 NI
Dividends received	£21,299
Dividend tax	−£2,236
Director take-home	£31,633/yr	£2,636/mo

Assumes England/Wales tax rates, £12,570 director salary, no pension contributions, no other personal income, all post-tax profit taken as dividends. Use the full calculator to model your specific position.

Small profits rate applies. Taxable profit of ££26,294 falls below the £50,000 threshold, so the 19% small profits rate applies. No marginal relief calculation is needed.

Frequently asked questions

How much corporation tax on £40,000 profit? ▾

After deducting a £12,570 director salary and ££1,136 employer NI, taxable profit is ££26,294. Corporation tax on this is ££4,996 at an effective rate of 19.0%. The gross profit of £40,000 is not directly subject to corporation tax — only the amount remaining after allowable deductions.

What is the most tax-efficient way to extract £40,000 from a limited company? ▾

The standard approach for 2026/27 is a director salary of £12,570 (no income tax, minimal employer NI) with remaining post-tax profit taken as dividends. On £40,000 gross profit, this produces a take-home of ££31,633. Adding company pension contributions can reduce the corporation tax bill and build tax-free savings simultaneously. Use the calculator to model alternatives.

Does the small profits rate or marginal relief apply at £40,000? ▾

The small profits rate of 19% applies. After deducting salary and employer NI, taxable profit is ££26,294, which is below the £50,000 threshold.

What is the overall effective tax rate on £40,000 limited company profit? ▾

The combined effective rate — employer NI (££1,136), corporation tax (££4,996), income tax on salary (££0), employee NI (££0) and dividend tax (££2,236) — is 20.92% of the £40,000 gross profit. Total tax: ££8,367.

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