Is Ireland's 12.5% corporation tax rate actually lower than the UK's?

For trading profit, yes, in most cases. Ireland's 12.5% rate applies to trading income, while the UK's FY2026 rates run from 19% up to £50,000 of profit to 25% above £250,000, with marginal relief in between. The gap is smaller for lower UK profits and wider once you're past the marginal relief band.

Can I set up an Irish company just to pay less tax on my UK profits?

No. Tax follows where the trade genuinely happens and where management decisions are actually made. An Irish company with no real activity in Ireland doesn't get to claim the 12.5% rate on profit that was, in substance, earned in the UK.

Does Ireland's 15% global minimum tax affect a small UK company?

No. The Pillar Two 15% minimum tax only applies to groups with consolidated annual revenue of €750 million or more. A small or mid-sized company sits well outside that rule and can ignore it.

What tax rate applies to rental or investment income in an Irish company?

25%, the same as non-trading income generally, not the 12.5% trading rate. If that income builds up inside the company without being distributed, the close company surcharge under section 440 can add a further layer.

How do VAT thresholds compare between Ireland and the UK?

Ireland requires VAT registration once turnover passes €42,500 for services or €85,000 for goods. The UK's threshold is £90,000 of taxable turnover in a rolling 12 month period. They're different currencies and different tests, so check both if you'll trade in both markets.

Ireland vs UK Corporation Tax: 2026 Rates Compared

You run a small company in the UK and someone has mentioned that Ireland taxes corporation profits at 12.5%. Maybe a supplier told you, maybe you read it somewhere, and now you're wondering if that's real or just a headline. It is real, but it only applies to profits that genuinely arise from trading activity actually carried out in Ireland. Before you compare tax bills side by side, it helps to understand both systems properly, and what really decides where a profit gets taxed.

In short

Ireland taxes trading profits at 12.5% and non-trading income, such as rent or investment income, at 25%

The UK's FY2026 rates run from 19% (profits up to £50,000) to 25% (profits over £250,000), with marginal relief in between

Ireland's close company surcharge can claw back some of that low rate if profits just sit inside the company as undistributed investment income

VAT registration starts at €42,500 (services) or €85,000 (goods) in Ireland, and at £90,000 in the UK

The 1976 Ireland-UK tax treaty stops the same profit being taxed twice, it doesn't let you choose your rate simply by where you incorporate

The headline rates, side by side

Ireland charges corporation tax at 12.5% on trading income, and 25% on non-trading income such as rental or investment income (Revenue, Corporation Tax basis of charge). The UK's rules for the financial year starting April 2026 work in bands: a small profits rate of 19% applies up to £50,000 of profit, the main rate of 25% applies above £250,000, and profit that falls in between gets marginal relief, which tapers the effective rate up gradually from 19% toward 25% (GOV.UK, Corporation Tax rates).

For a UK company with modest profits, the effective UK rate can already sit close to Ireland's 12.5%, sometimes even below it under £50,000. The real gap opens up once profits climb well past the marginal relief band.

Non-trading income and the close company surcharge

The 12.5% figure gets misread often. It applies to trading income only. Rental income, investment income, and most passive income earned by an Irish company are taxed at 25%, the same as the UK's main rate (Revenue, Corporation Tax basis of charge).

There's a second detail worth knowing if you're thinking of holding cash or investments inside an Irish company rather than paying it out: the close company surcharge. Under section 440 of the Taxes Consolidation Act, a close company (broadly, one controlled by a small number of people) can face a surcharge on undistributed investment and estate income that hasn't been paid out to shareholders (Revenue, TDM Part 13-02-05). A separate surcharge can also apply to certain service companies. In practice, an Irish company isn't a great place to simply park passive income and leave it sitting there.

Beyond the rate: VAT and the R&D credit

Corporation tax is only one line in the comparison. VAT registration becomes compulsory in Ireland once turnover passes €42,500 for services or €85,000 for goods (Revenue, VAT thresholds). In the UK, the equivalent trigger is £90,000 of taxable turnover in a rolling 12 month period (GOV.UK, Register for VAT). Neither threshold is obviously better, they're simply different currencies and different rules.

If research and development matters to your business, Ireland's R&D tax credit rose to 35% for accounting periods beginning on or after 1 January 2026 (Revenue, Budget 2026 Summary). The UK runs its own separate R&D relief scheme with its own rates, which we haven't quoted figures for here because they weren't part of the facts we verified for this article. If R&D spend is material to your numbers, get both schemes compared properly before assuming either one wins.

Filing rhythm: when the return is actually due

An Irish company files and pays its corporation tax (the CT1 return) within nine months of its accounting period end, and by the 23rd of that ninth month specifically if filing through ROS, Revenue's online system (Revenue, Corporation Tax payment and filing). One deadline covers both the filing and the payment.

The UK runs its own separate filing calendar, which we're not stating here since UK filing deadlines weren't part of the facts we verified for this piece. What matters for comparison purposes is simpler: running companies in both jurisdictions means two tax authorities, two filing calendars, and two sets of accounts, not one combined system.

Why you can't just move UK profits to Ireland

This is the part that gets skipped. You cannot take profit your UK company earns from UK customers, UK staff, and UK management, and tax it at 12.5% simply by registering an Irish company on paper. Tax authorities look at where the trade is genuinely carried on, where decisions are actually made, and where the activity producing the profit really happens. An Irish company with no real activity in Ireland doesn't get to claim the Irish rate on profit that was, in substance, earned in the UK.

The 1976 Ireland-UK Double Taxation Convention, as amended by the 1998 Protocol, is still in force, and it exists to stop the same profit being taxed twice, not to let a business shop for whichever rate is lower (GOV.UK, Ireland tax treaties). It's also worth knowing that Ireland's 15% global minimum tax under the Pillar Two rules only applies to groups with consolidated annual revenue of €750 million or more (Revenue, What are the Pillar Two rules?). A small or mid-sized company simply isn't touched by that floor, which is one less thing to think about, though it's not a reason to assume small companies can pick rates freely either.

One practical note if you do go ahead: Irish company law requires at least one director resident in an EEA state, and the UK is not one, since it left the EEA on 31 December 2020. Without an EEA-resident director, the company needs a bond of €25,000, held for a minimum of two years, as an alternative. That's a company law requirement, not a tax one, but it shapes how the structure actually works in practice.

This comparison genuinely matters when you're setting up real operations, hiring real staff, or running real trade through Ireland, including to access the EU single market. It matters far less if the plan is simply to relabel UK activity as Irish on paper.

What this means in practice

Take a UK company earning around £80,000 of profit in FY2026. That sits inside the UK's marginal relief band between £50,000 and £250,000, so the effective rate lands somewhere between the 19% small profits rate and the 25% main rate, well above 19% at this profit level (GOV.UK, Corporation Tax rates). Now picture the same £80,000 of trading profit, genuinely earned by an Irish company actually trading in Ireland: it would be taxed at the flat 12.5% rate (Revenue, Corporation Tax basis of charge). The gap between those two outcomes is real. What makes it available to you is whether the profit is genuinely Irish, not whether you'd simply prefer the lower number.

Common mistakes

Comparing headline rates only. 12.5% against 19% to 25% looks like a clear win until you factor in how you actually get the money out as salary or dividends, which carries its own tax in both countries.

Assuming 12.5% covers everything. Rental and investment income earned by an Irish company is taxed at 25%, not 12.5% (Revenue, Corporation Tax basis of charge). Plenty of people only find this out after the fact.

Ignoring the close company surcharge. If profits build up inside the company as cash or investments instead of being distributed, the surcharge on undistributed investment income can erode the benefit of the low rate.

Treating incorporation as profit relocation. Setting up an Irish company doesn't move UK-earned profit into a lower bracket. What gets taxed where follows where the trade and the management genuinely sit, not where the paperwork is filed.

Next steps

If you're seriously weighing up an Irish company alongside your UK one, the numbers only start to mean something once we know where your actual trade will sit, how you plan to take profit out, and what your VAT position looks like on both sides. Get in touch and we'll go through your specific situation before you commit to anything.

This article is general information, not tax advice. Your situation may be different. Talk to a qualified accountant before making decisions based on this.

Ireland vs UK Corporation Tax: What the Rates Actually Mean