Corporation Tax Rates 2026/27: Small Profits Rate and Marginal Relief

Key takeaways

• Small profits rate: 19% up to £50,000.
• Main rate: 25% above £250,000.
• Marginal relief applies between £50,000 and £250,000.
• Payment is due nine months and one day after the period end; the CT600 is due 12 months after.
• Limits are divided by the number of associated companies.

The two Corporation Tax rates

Corporation Tax is charged on a company’s taxable profits. It is not the same as accounting profit, because the tax computation adds back items that are not deductible, such as client entertainment, and subtracts tax reliefs such as capital allowances. The result is taxable profit for the accounting period.

If taxable profit is £50,000 or less, the small profits rate of 19% applies. If it is £250,000 or more, the main rate of 25% applies to the whole amount. Companies with profits in between pay the main rate, then claim marginal relief to reduce the bill.

How marginal relief works

Marginal relief is calculated as 3/200 multiplied by the difference between £250,000 and your profits, scaled by the ratio of taxable profits to total profits. For a company with no dividend income from other companies, it is simply 3/200 × (£250,000 − profits). The relief is deducted from the tax at the main rate.

Worked example: £80,000 of profit

• Tax at 25%: £20,000.
• Marginal relief: 3/200 × (£250,000 − £80,000) = 0.015 × £170,000 = £2,550.
• Corporation Tax payable: £17,450, an effective rate of about 21.8%.

Worked example: £150,000 of profit

• Tax at 25%: £37,500.
• Marginal relief: 0.015 × £100,000 = £1,500.
• Corporation Tax payable: £36,000, an effective rate of 24%.

Use our Corporation Tax calculator to run your own numbers, and read the marginal relief explained Q&A for more detail.

Associated companies and short periods

The £50,000 and £250,000 limits are divided by one plus the number of associated companies. If you control two other companies, the limits are divided by three, giving £16,667 and £83,333. Companies are generally associated if one controls the other, or both are controlled by the same person. Family members’ holdings can also count in some situations. The limits are also reduced pro rata if the accounting period is shorter than 12 months.

Reducing your Corporation Tax bill legitimately

• Capital allowances. The Annual Investment Allowance gives 100% relief on up to £1 million of qualifying plant and machinery. Companies can also claim full expensing on new qualifying main-rate assets. See full expensing and the AIA.
• Employer pension contributions. Usually deductible if they meet the wholly and exclusively test.
• Director salary and employer NI. Pay is deductible, which can reduce profit.
• R&D relief. Qualifying innovation costs may attract enhanced relief. See R&D tax credits.
• Allowable expenses. Make sure every genuine business cost is recorded.

Corporation Tax deadlines and penalties

Corporation Tax is due nine months and one day after the end of the accounting period. The CT600 return must be filed within 12 months of the period end, together with accounts in iXBRL format. If the return is late, a £100 penalty applies immediately and a further £100 after three months, followed by percentage-based penalties if it is more than six months late. Interest applies to late payment. Use our filing deadline calculator to check dates.

Large companies, with profits above £1.5 million, pay in instalments. Most small and medium companies pay in a single payment.

Corporation Tax for new companies

You must register for Corporation Tax within three months of starting to trade or doing other business. Your first accounting period usually starts on the day you begin trading and cannot exceed 12 months, so a long first year may need two returns. See how to register for Corporation Tax.

Corporation Tax across the UK

Corporation Tax is a UK-wide tax, so England, Scotland, Wales and Northern Ireland use the same rates. Northern Ireland has its own rules for trade with the EU, and companies there file with Companies House for Northern Ireland. If you have branches or associated companies overseas, extra rules may apply.

Corporation Tax compared with other taxes

Corporation Tax is only one part of the picture. A company that pays out profit to its owners also creates personal tax liabilities. Dividends are taxed again at personal level, which is why directors often look at the combined burden. For example, £100 of profit at the 19% rate leaves £81 for dividends, and dividend tax at 10.75% would be charged on amounts above the allowance, leaving about £72 in the director’s pocket. Comparing this with income tax and National Insurance on an equivalent salary is how accountants judge the best structure for you. Our salary vs dividend calculator does the sums.

Which expenses reduce Corporation Tax?

To be deductible, an expense must be incurred wholly and exclusively for the purposes of the trade. Typical deductible items include accountancy fees, software, insurance, business travel, advertising and staff costs. Capital purchases such as laptops are not deducted as expenses but are written off through capital allowances. Some costs are never deductible, such as fines and most client entertainment. Keeping the books accurate throughout the year ensures every legitimate cost is included. See our allowable expenses guide.

Losses and Corporation Tax

If a company makes a loss, there is no Corporation Tax to pay for that period. Trading losses can generally be carried back against profits of the previous 12 months or carried forward to reduce future profits, subject to rules. Losses do not create a refund of tax in most cases unless carried back. Because losses can be valuable, make sure they are reported correctly on the CT600.

Planning ahead for the bill

Set aside money each month for Corporation Tax. A simple approach is to estimate your tax rate from year-to-date profit and move that amount into a separate savings account. Your accountant can produce a forecast at least once a year, ideally before the year end, so you can still make changes such as buying equipment or paying a pension contribution. After the year end, the amount is fixed, so planning needs to happen early.

The bottom line

Corporation Tax is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between. Set money aside monthly and claim every allowable expense to keep the bill as low as the rules allow.

Frequently asked questions

What is the Corporation Tax rate for 2026/27?

The small profits rate is 19% on profits up to £50,000 and the main rate is 25% on profits above £250,000, with marginal relief in between.

How is marginal relief calculated?

Multiply the difference between £250,000 and your profits by 3/200 and deduct it from tax at the main rate, adjusted for associated companies and short periods.

When do I pay Corporation Tax?

Nine months and one day after the end of your accounting period. The CT600 is due 12 months after the period ends.

Do associated companies affect Corporation Tax?

Yes. The profit limits are divided by one plus the number of associated companies.

Is Corporation Tax the same in Scotland and Wales?

Yes. Corporation Tax is a UK-wide tax with the same rates everywhere.