Who is exempt from corporation tax?

• A. Limited companies
• B. Partnerships
• C. Charities
• D. Sole traders

Answer: (D)

Corporation tax applies to profits of companies and certain other corporate bodies. A sole trader operates as an individual, not as a separate company, so their business profits aren’t charged under corporation tax. Instead, a sole trader pays income tax and National Insurance on their business profits through self‑assessment. That’s why a sole trader is the type of entity typically exempt from corporation tax. (Charities can be exempt in some cases, but the question’s focus is on the distinction between corporate taxation and individual taxation.)