UK limited companies pay Corporation Tax at 19% on profits up to £50,000 and 25% on profits over £250,000. Companies with profits between these two thresholds pay the main rate, reduced by marginal relief.
These rates apply to the financial year starting 1 April 2026 and have stayed the same since April 2023. This guide explains each Corporation Tax threshold, how marginal relief works and what reduces the limits for your company.
Corporation Tax Rates for 2026/27
| Taxable profits | Rate | Name |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate |
| £50,001 to £250,000 | 25% less marginal relief | Marginal relief band |
| Over £250,000 | 25% | Main rate |
These thresholds apply to a full 12-month accounting period for a company with no associated companies. Both points can lower the limits, as explained below.
What Is Marginal Relief?
Marginal relief smooths the jump from 19% to 25%. Without it, a company earning £50,001 would suddenly pay 25% on all its profits.
Instead, the company pays 25% and then deducts marginal relief. The relief gets smaller as profits rise, and disappears at £250,000.
The standard formula is:
Marginal relief = (£250,000 − profits) × 3/200
Where a company receives dividends from companies outside its group, these are added to profits when working out the relief.
Worked Examples
| Taxable profits | Tax at 25% | Marginal relief | Corporation Tax due | Effective rate |
|---|---|---|---|---|
| £50,000 | — | — | £9,500 | 19.00% |
| £100,000 | £25,000 | £2,250 | £22,750 | 22.75% |
| £150,000 | £37,500 | £1,500 | £36,000 | 24.00% |
| £200,000 | £50,000 | £750 | £49,250 | 24.63% |
| £250,000 | £62,500 | £0 | £62,500 | 25.00% |
Take a company with profits of £100,000:
- Tax at the main rate: £100,000 × 25% = £25,000
- Marginal relief: (£250,000 − £100,000) × 3/200 = £2,250
- Corporation Tax due: £25,000 − £2,250 = £22,750
The Hidden 26.5% Rate
Each extra pound of profit between £50,000 and £250,000 is taxed at an effective 26.5%. This is higher than the main rate, because the company pays 25% and also loses some marginal relief.
This matters for planning. If your company’s profits fall in this band, timing costs carefully, or making employer pension contributions, can save tax at 26.5% rather than 19%. Our Corporation Tax accountants can review where your profits sit before your year end.
What Reduces the Thresholds?
Associated Companies
If your company has associated companies, the £50,000 and £250,000 limits are shared between them. Companies are usually associated when the same person or group controls them.
You divide each threshold by the number of associated companies plus one.
| Associated companies | Lower threshold | Upper threshold |
|---|---|---|
| None | £50,000 | £250,000 |
| 1 | £25,000 | £125,000 |
| 2 | £16,667 | £83,333 |
| 3 | £12,500 | £62,500 |
This rule stops business owners splitting one business into several companies to keep each one at 19%. Dormant companies usually do not count as associated.
Short Accounting Periods
If your accounting period is shorter than 12 months, the thresholds reduce in proportion. For example, a six-month period has limits of £25,000 and £125,000.
This often affects new companies, because a first accounting period can be shorter than a year. Our checklist for newly formed companies covers what to do after incorporation.
When Is Corporation Tax Due?
| Deadline | When |
|---|---|
| Register for Corporation Tax | Within 3 months of starting to trade |
| Pay Corporation Tax | 9 months and 1 day after the end of your accounting period |
| File your CT600 return | 12 months after the end of your accounting period |
Note that payment is due before the return. Many company owners miss this, because they assume both deadlines are the same.
Large companies with profits over £1.5 million pay in quarterly instalments instead.
Corporation Tax and Taking Money Out of Your Company
Corporation Tax is paid on company profits before you take any dividends. This affects how directors should pay themselves.
For example, salary and employer pension contributions are deducted before Corporation Tax is worked out, while dividends are paid from profits after tax. Our guide to salary vs dividends explains the most tax-efficient mix for 2026/27.
Will Corporation Tax Rates Change?
The government’s Corporate Tax Roadmap committed to keeping the main rate at no more than 25% for this Parliament, and to keeping the small profits rate and marginal relief. The Autumn Budget on 28 October may still bring other changes for companies, such as reliefs and allowances.
Read our guide on whether you should act before the Autumn Budget. You can also check HMRC’s official Corporation Tax rates on GOV.UK.
Frequently Asked Questions
What is the Corporation Tax threshold for 2026/27?
The small profits rate of 19% applies up to £50,000 of profits. The main rate of 25% applies above £250,000. Marginal relief applies in between.
Do I pay 25% on all profits if I earn over £50,000?
No. If profits are between £50,000 and £250,000, you pay 25% minus marginal relief. Your effective rate will be between 19% and 25%.
Does a dormant company pay Corporation Tax?
No. A dormant company has no taxable profits, so it pays no Corporation Tax. It still has to file accounts with Companies House. Read more about dormant company accounts.
Do sole traders pay Corporation Tax?
No. Corporation Tax only applies to limited companies and some other organisations. Sole traders pay Income Tax and National Insurance on their profits through Self Assessment.
Is Corporation Tax worked out on the financial year or my accounting period?
It is charged by financial year, which runs from 1 April to 31 March. If your accounting period spans two financial years with different rates, the profits are split between them. As rates have not changed since April 2023, most companies will not see a difference.
Get Help With Corporation Tax
Corporation Tax is simple when profits are low, but marginal relief, associated companies and short periods can quickly make it complex. Our ACCA-regulated team prepares your accounts and CT600, plans around your thresholds and makes sure you pay on time.
Find out more about our limited company accounting and Corporation Tax services, or call 020 3633 2018 to speak to our accountants in Slough.