Corporation Tax Rates UK 2026: 19%, 25% and Marginal Relief
UK corporation tax rates for 2026/27: the 19% small profits rate, 25% main rate, marginal relief with worked examples, deadlines and associated companies.
UK corporation tax rates for the financial year starting 1 April 2026 are 19% for companies with taxable profits of £50,000 or less and 25% for profits over £250,000. Companies in between pay the 25% main rate reduced by marginal relief, which gives an effective rate between 19% and 25% and a marginal rate of 26.5% on profits in that band.
This guide explains how the small profits rate and marginal relief work, with worked examples, how associated companies and short accounting periods change the limits, and when you must pay and file. Figures come from GOV.UK and HMRC guidance at the time of writing (October 2026). This is general information, not tax advice, so check your own calculation with an accountant.
Corporation tax rates for 2026/27 at a glance
| Taxable profits | Rate | Notes |
|---|---|---|
| £0 to £50,000 | 19% small profits rate | Lower limit |
| £50,001 to £250,000 | 25% less marginal relief | Effective rate between 19% and 25% |
| Over £250,000 | 25% main rate | Upper limit |
| Marginal relief fraction | 3/200 | Used in the relief formula |
Corporation tax works on financial years that run from 1 April to 31 March, so "financial year 2026" means 1 April 2026 to 31 March 2027. These corporation tax rates have been in place since 1 April 2023, when the main rate rose from a flat 19%. The Corporate Tax Roadmap published in October 2024 committed to capping the main rate at 25% for this Parliament, and the Finance Act 2025 set the rates for financial year 2026.
Because the rates have not changed since 2023, a company whose accounting period straddles 1 April 2026, such as a year ending 31 December 2026, uses the same rates throughout. If rates ever change, profits are split by the number of days falling in each financial year.
Who pays corporation tax
Corporation tax is paid by UK limited companies, foreign companies with a UK branch or office, and some unincorporated organisations such as clubs, societies and co-operatives. Sole traders and partnerships do not pay it; they pay Income Tax through Self Assessment on their profits. If you are deciding which structure to use, our guide to sole trader vs limited company compares the total tax picture.
A company must tell HMRC it is active for corporation tax within 3 months of starting to do business. It then has to work out its own liability; HMRC does not send a bill.
How the small profits rate works
The 19% small profits rate applies when taxable profits are £50,000 or less. Taxable profits are not the same as sales or bank balance. They are:
- trading profit from your accounts
- plus any investment income, such as interest, and chargeable gains
- minus allowable expenses and capital allowances
- with disallowable items, such as depreciation and client entertaining, added back
Example: a small consultancy has sales of £140,000, running costs of £85,000 including £3,000 of depreciation and £1,000 of client entertaining, and claims £4,000 of capital allowances on new laptops. Taxable profit is £140,000 minus £85,000 = £55,000, plus £4,000 added back = £59,000, minus £4,000 capital allowances = £55,000. That is just above the lower limit, so marginal relief applies rather than the flat 19%.
Good records make this calculation easy. A clean profit and loss statement and a reliable way to track business expenses are the starting points for every corporation tax computation.
Marginal relief explained with worked examples
Marginal relief smooths the jump from 19% to 25%. You calculate tax at 25% on all profits, then deduct relief using this formula:
Marginal relief = (U minus A) x (N / A) x 3/200
- U is the upper limit, normally £250,000
- A is augmented profits: taxable profits plus exempt distributions (dividends) from companies that are not in the same group
- N is taxable total profits
If your company receives no such dividends, N and A are equal, and the formula simplifies to (£250,000 minus profits) x 3/200.
Example 1: £100,000 of profit
- Tax at main rate: £100,000 x 25% = £25,000
- Marginal relief: (£250,000 minus £100,000) x 3/200 = £150,000 x 0.015 = £2,250
- Corporation tax due: £25,000 minus £2,250 = £22,750
- Effective rate: £22,750 / £100,000 = 22.75%
Example 2: profit with dividends from another company
A company has taxable profits of £100,000 and also receives £20,000 of exempt dividends from shares in an unrelated company. Augmented profits are £120,000.
- Tax at main rate on taxable profits: £100,000 x 25% = £25,000
- Marginal relief: (£250,000 minus £120,000) x (£100,000 / £120,000) x 3/200 = £130,000 x 0.8333 x 0.015 = £1,625
- Corporation tax due: £25,000 minus £1,625 = £23,375
The dividends are not taxed themselves, but they reduce the relief, so the company pays £625 more than in Example 1.
Effective rates across the band
| Taxable profits | Tax at 25% | Marginal relief | Tax due | Effective rate |
|---|---|---|---|---|
| £50,000 | n/a | n/a | £9,500 | 19% |
| £75,000 | £18,750 | £2,625 | £16,125 | 21.5% |
| £100,000 | £25,000 | £2,250 | £22,750 | 22.75% |
| £150,000 | £37,500 | £1,500 | £36,000 | 24% |
| £200,000 | £50,000 | £750 | £49,250 | 24.63% |
| £250,000 | £62,500 | £0 | £62,500 | 25% |
The hidden 26.5% marginal rate
Compare the £50,000 and £250,000 rows. The extra £200,000 of profit costs £53,000 more tax (£62,500 minus £9,500), which is 26.5%. In other words, each extra pound of profit in the marginal relief band is taxed at 26.5%, higher than the main rate. That makes deductible spending, such as employer pension contributions or equipment purchases, slightly more valuable for companies in this band. HMRC's online marginal relief calculator will check your figures.
How corporation tax rates have changed
Many owners still quote "19%" as the UK rate because it applied to every company for six years. The history explains why older guides and software settings can mislead you:
| Financial year starting | Small profits rate | Main rate |
|---|---|---|
| 1 April 2017 to 1 April 2022 | 19% (single rate for all profits) | 19% |
| 1 April 2023 | 19% up to £50,000 | 25% over £250,000 |
| 1 April 2024 | 19% | 25% |
| 1 April 2025 | 19% | 25% |
| 1 April 2026 | 19% | 25% |
If you are reviewing an old computation or a spreadsheet built before April 2023, check that it applies the current corporation tax rates and marginal relief rather than a flat 19%. The difference is large: on £150,000 of profit, a flat 19% gives £28,500, while the correct figure is £36,000.
Year-end planning example
Take a company expecting £130,000 of taxable profit for the year to 31 March 2027. Using the formula, tax would be £32,500 minus marginal relief of £1,800 (£120,000 x 3/200), so £30,700.
Before the year end, the directors decide to make a £20,000 employer pension contribution, which is a deductible expense. Taxable profit falls to £110,000. Tax becomes £27,500 minus £2,100 (£140,000 x 3/200), so £25,400. The £20,000 contribution has cut the bill by £5,300, which is 26.5% of £20,000, exactly the marginal rate in the band.
The same logic applies to buying equipment that qualifies for the Annual Investment Allowance before the year end, as long as the purchase makes commercial sense. Never spend money purely for a tax deduction: spending £20,000 to save £5,300 still leaves the company £14,700 poorer unless the spending has value for the business. Discuss pension and investment timing with your accountant, since contribution limits and personal tax also matter.
Associated companies and short accounting periods
The £50,000 and £250,000 limits are shared, not given to each company. They are divided by the number of associated companies plus one. Companies are generally associated if one controls the other, or both are controlled by the same person or group of persons, at any time in the accounting period. Dormant companies and certain passive holding companies are ignored.
| Associated companies | Lower limit | Upper limit |
|---|---|---|
| None | £50,000 | £250,000 |
| 1 | £25,000 | £125,000 |
| 2 | £16,667 | £83,333 |
| 3 | £12,500 | £62,500 |
Example: a company with £100,000 of profit and one associated company uses an upper limit of £125,000. Marginal relief is (£125,000 minus £100,000) x 3/200 = £375, so tax is £25,000 minus £375 = £24,625, compared with £22,750 for a standalone company.
The limits are also reduced proportionately for accounting periods shorter than 12 months. A company's first accounting period of six months would have limits of roughly £25,000 and £125,000, calculated precisely by the number of days in the period.
Deadlines: paying and filing
| Obligation | Deadline |
|---|---|
| Tell HMRC the company is active | Within 3 months of starting to do business |
| Pay corporation tax (profits up to £1.5m) | 9 months and 1 day after the end of the accounting period |
| Pay corporation tax (large companies, profits over £1.5m) | Quarterly instalment payments |
| File Company Tax Return (CT600) | 12 months after the end of the accounting period |
| File accounts at Companies House | Usually 9 months after the year end (private companies) |
Notice that payment is due before the return. A company with a 31 March 2026 year end must pay by 1 January 2027 and file its return by 31 March 2027. Late payment attracts interest, and late filing starts with a £100 penalty. Directors should also keep on top of Companies House duties, including Companies House identity verification.
Corporation tax and taking money out
Corporation tax is only the first layer. When you take profit out of a company as a director-shareholder, you pay personal tax as well:
- Dividends come from profits after corporation tax and are taxed at dividend rates; see our UK dividend tax rates 2026 guide.
- Salary is deductible for corporation tax but carries employer National Insurance; our employer National Insurance 2026 guide has the current figures.
- Employer pension contributions are usually deductible and free of National Insurance, which is why they are popular for companies in the 26.5% marginal band.
Capital allowances also affect the bill. The Annual Investment Allowance gives a 100% deduction for up to £1 million of qualifying plant and machinery a year, and companies can claim full expensing on new main-rate plant. Further changes to capital allowances were announced at the November 2025 Budget, so check GOV.UK or your accountant for the current rules before making a big purchase.
Practical checklist for small company owners
- Confirm your accounting period dates and any associated companies.
- Keep invoices, receipts and bank records organised throughout the year.
- Estimate taxable profit a few months before the year end and decide on any pension contributions or equipment purchases.
- Set aside money for corporation tax monthly, using your expected effective rate.
- Pay 9 months and 1 day after the year end, then file the CT600 within 12 months.
If you also have a small side trade in your own name, note that the £1,000 trading allowance is for individuals and cannot be used for income that flows through your company.
Conclusion
UK corporation tax rates for 2026/27 are straightforward at either end: 19% up to £50,000 and 25% above £250,000. The work is in the middle, where marginal relief, associated companies and dividends all change the result, and where every extra pound of profit costs 26.5%. Accurate sales records make the computation reliable, and that starts with consistent invoicing. Create professional company invoices with your registered company number and VAT details using our free UK invoice generator, or choose a polished layout from our corporate invoice template.
Frequently asked questions
What is the UK corporation tax rate for 2026?
For the financial year starting 1 April 2026, the main rate is 25% for companies with taxable profits over £250,000, and the small profits rate is 19% for profits of £50,000 or less. Companies with profits between those limits pay the main rate reduced by marginal relief, giving an effective rate between 19% and 25%. These rates have applied since 1 April 2023, and the government has committed to capping the main rate at 25% for this Parliament.
How is marginal relief calculated?
Work out tax at the 25% main rate, then subtract marginal relief. The standard formula is (upper limit minus augmented profits) multiplied by (taxable profits divided by augmented profits) multiplied by the fraction 3/200. If the company has no exempt dividends from other companies, taxable and augmented profits are the same, so relief is simply £250,000 minus profits, multiplied by 3/200. For £100,000 of profit, relief is £2,250 and tax is £22,750.
What is the marginal rate of corporation tax between £50,000 and £250,000?
Each extra pound of profit between £50,000 and £250,000 is effectively taxed at 26.5%. That is because the 25% main rate applies and marginal relief shrinks by 1.5p for every extra pound. A company at £50,000 pays £9,500, and at £250,000 pays £62,500, so the extra £200,000 of profit costs £53,000 in tax, which is 26.5%. This matters when deciding on pension contributions, bonuses or the timing of expenses.
When is corporation tax due?
For most companies, corporation tax must be paid 9 months and 1 day after the end of the accounting period. The Company Tax Return (CT600) is due 12 months after the end of the accounting period. Large companies with profits over £1.5 million pay in quarterly instalments instead. You do not receive a bill from HMRC, so you must calculate what is owed and pay on time to avoid interest and penalties.
How do associated companies affect corporation tax?
The £50,000 and £250,000 limits are divided by the number of associated companies plus one. Companies are generally associated if one controls the other or both are under the control of the same person or group. With one associated company, the limits fall to £25,000 and £125,000. This stops business owners splitting profits across several companies to get more profit taxed at 19%. Dormant companies and some passive holding companies are ignored.
Do small companies still pay 19% corporation tax?
Yes, if their taxable profits are £50,000 or less, after adjusting for associated companies and short accounting periods. The small profits rate is 19%. Note that the test uses taxable profits, after deducting allowable expenses and capital allowances, not turnover. A company with £400,000 of sales and £45,000 of taxable profit pays 19%, while a company with £120,000 of sales and £60,000 of profit pays a little over 19% due to marginal relief.
Does corporation tax apply to sole traders?
No. Corporation tax is paid by limited companies and some other organisations such as clubs and co-operatives. Sole traders and partners pay Income Tax and National Insurance on their business profits through Self Assessment instead. If you run a limited company, you then pay personal tax on any salary or dividends you take out, so the total tax bill depends on how you extract profit as well as the corporation tax rate.
What counts as taxable profit for corporation tax?
Taxable profit is the company's trading profit plus investment income and chargeable gains, after deducting allowable business expenses and capital allowances. Some accounting expenses, such as client entertaining and depreciation, are not deductible and are added back. Capital allowances, including the Annual Investment Allowance of up to £1 million a year, give relief for equipment instead. Dividends received from other companies are usually exempt but can affect the marginal relief calculation.
Are corporation tax rates going to change?
The government's Corporate Tax Roadmap, published in October 2024, committed to keeping the main rate capped at 25% for this Parliament and keeping the small profits rate and marginal relief thresholds at their current levels. The Finance Act 2025 set the rates for the financial year starting 1 April 2026. Future Budgets can still change policy, so check GOV.UK for the latest rates before you prepare a tax computation.
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