Answers · UK 2025/26
What is the Tonnage Tax regime for UK shipping companies?
Tonnage Tax is an optional alternative corporation tax regime for qualifying shipping companies. Instead of paying CT on actual shipping profits, qualifying companies pay tax on a notional profit calculated by reference to the net tonnage of ships operated. The regime was introduced in 2000 and is designed to make the UK competitive as a flag and management location for shipping.
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The UK Tonnage Tax regime was introduced by Finance Act 2000 and is available to companies operating qualifying ships. It replaced the standard corporation tax calculation for shipping profits with a simpler flat-rate approach based on ship size. **How it works:** Instead of calculating actual shipping profits and paying 25% CT, a qualifying company pays CT on a deemed profit based on the net tonnage of each ship: | Net tonnage (per vessel) | Daily profit per 100 tonnes | |---|---| | Up to 1,000 tonnes | £0.60 | | 1,001-10,000 tonnes | £0.45 | | 10,001-25,000 tonnes | £0.30 | | Over 25,000 tonnes | £0.15 | A vessel of 50,000 net tonnes would generate a daily deemed profit of: (1,000 x £0.60 + 9,000 x £0.45 + 15,000 x £0.30 + 25,000 x £0.15) / 100 = approximately £97.50/day per ship. Applied over the year and multiplied by the 25% CT rate, the actual tax is very low compared to a profitable shipping company's real profits. **Qualifying conditions:** - The company must be subject to UK corporation tax - Ships operated must be "qualifying ships" -- broadly, seagoing vessels of 100 gross tons or more, used for transporting passengers or cargo - The company must be part of a corporate group that operates a fleet strategically or commercially managed in the UK - A 10-year election period applies -- once elected, the company stays in Tonnage Tax for 10 years **What is NOT within Tonnage Tax:** - Profits from ship management, crewing, or technical management services - Profits from inland waterway vessels, harbour vessels, and ships used for fishing - Financial activities of shipping groups (interest, etc.) **Capital allowances:** Companies in Tonnage Tax cannot claim capital allowances on qualifying ships -- they are effectively "bought out" by the favourable tax rate. **Policy intent:** Tonnage Tax is designed to keep shipping companies registered and managed in the UK, preserving maritime expertise, employment, and the UK ship register.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.