- Small profits rate
- the 19% corporation tax rate for companies with taxable profits up to £50,000.
- Main rate
- the 25% corporation tax rate for companies with taxable profits over £250,000.
- Marginal relief
- a sliding reduction that applies between £50,001 and £250,000 of profit, raising the effective rate smoothly from 19% to 25%.
- Marginal relief fraction
- the figure 3/200 used in the HMRC formula to calculate the relief.
- Associated company
- another company under the same control, which shares the £50,000 and £250,000 thresholds and so can push you to the higher rate sooner.
Key facts
- Small profits rate 19% on taxable profits up to £50,000
- Main rate 25% on taxable profits over £250,000
- Marginal relief band £50,001 to £250,000, fraction 3/200
- Effective marginal rate 26.5% on each extra £1 inside the band
- At £100,000 profit: £22,750 corporation tax (22.75% effective rate)
Corporation tax is only the first layer. Once the company has paid it, taking the post-tax profit as dividends triggers dividend tax, which rose to 10.75% for basic-rate taxpayers in 2026/27, so plan the two together. See our dividend tax guide at dividend tax rates 2026/27 and weigh the structure with limited company vs sole trader.
To put real numbers against your own profit, use the Corporation Tax Calculator, and for the salary side of a director's pay use the Income Tax Calculator.
The Three Zones of Corporation Tax
| Profits Level | Corporation Tax Rate | Notes |
|---|---|---|
| £0 to £50,000 | 19% small profits rate | Applies to profits at or below the lower limit |
| £50,001 to £250,000 | 19% to 25% (marginal relief) | Effective rate increases through the band |
| Over £250,000 | 25% main rate | All profits taxed at 25% |
These thresholds are divided by the number of associated companies plus one.
How Marginal Relief Works
The marginal relief formula blends the two rates across the £50,001 to £250,000 band. The effective rate on profits within this range is approximately 26.5% on the marginal pound, creating a slightly higher effective rate on the band than the headline 25% main rate.
Marginal relief formula:
Corporation tax = [Profits x 25%] minus [marginal relief fraction x (£250,000 minus profits)]
The marginal relief fraction for 2026/27 is 3/200.
Corporation tax at 25% = £25,000
Marginal relief = 3/200 x (£250,000 minus £100,000) = 3/200 x £150,000 = £2,250
Corporation tax after marginal relief = £25,000 minus £2,250 = £22,750
Effective rate = 22.75%
Corporation Tax Calculator 2026/27
Calculate your exact corporation tax bill for any profit level, including the marginal relief calculation automatically.
Effective Corporation Tax Rates at Key Profit Levels
| Annual Profits | Corporation Tax Payable | Effective Rate |
|---|---|---|
| £25,000 | £4,750 | 19.0% |
| £50,000 | £9,500 | 19.0% |
| £75,000 | £15,063 | 20.1% |
| £100,000 | £22,750 | 22.8% |
| £150,000 | £33,250 | 22.2% |
| £200,000 | £44,750 | 22.4% |
| £250,000 | £62,500 | 25.0% |
| £300,000 | £75,000 | 25.0% |
The Associated Companies Problem
The most commonly overlooked aspect of the corporation tax changes is the associated companies rule. If your company is "associated" with another company, the threshold limits (£50,000 and £250,000) are divided by the total number of associated companies plus one.
Definition of associated companies: Two companies are associated if one controls the other, or both are controlled by the same person or persons. This includes companies owned by a spouse or civil partner in many circumstances.
Practical impact:
A limited company director who also owns a holding company has two companies. The thresholds are halved:
- Small profits rate applies to profits up to £25,000 (not £50,000)
- Main rate applies to profits above £125,000 (not £250,000)
If the director also runs a second trading company, thresholds are divided by three:
- Small profits rate up to £16,667
- Main rate above £83,333
Expert Tip
If you are thinking of setting up a second company (holding company, property company, or new trading entity), check the associated companies impact on your existing company's corporation tax rate before proceeding. A second company can inadvertently push your existing company from the 19% small profits rate into the marginal relief zone or even the 25% main rate, significantly increasing your tax bill.When Corporation Tax Is Due: Payment Deadlines
The payment deadline depends on company size:
Small companies (profits under £1.5 million): Corporation tax is due 9 months and one day after the end of the accounting period. For a company with a 31 March year end, payment is due 1 January.
Large companies (profits £1.5 million to £20 million): Quarterly instalment payments (QIPs) apply. First instalment is due 6 months and 13 days after the start of the accounting period.
Very large companies (profits over £20 million): Earlier quarterly instalment payment schedule applies.
Most small and medium companies fall into the standard category: one payment, nine months and one day after the accounting year end.
Optimising Corporation Tax: Legitimate Strategies
Director salary and pension: Paying a director salary up to the optimal level reduces corporation tax because salaries are deductible expenses. The optimal director salary for 2026/27 is typically £12,570 (using the personal allowance with no employer NI cost) or £9,100 in some scenarios. Employer pension contributions are fully deductible and reduce corporation tax.
R&D tax credits: Companies engaged in qualifying research and development can claim enhanced deductions on R&D expenditure or cash credits. SMEs claim under the RDEC scheme (18.6% credit on qualifying spend) or the merged RDEC scheme from April 2024.
Capital allowances: Annual Investment Allowance (AIA) of up to £1 million per year allows businesses to deduct 100% of qualifying capital expenditure (plant, machinery, IT equipment) in the year of purchase.
Dividend vs salary planning: See the article on dividend tax rates 2026/27 for the optimal salary/dividend mix for a director in the small profits zone.
What Changed for 2026/27
Corporation tax rates are unchanged for 2026/27. The 19% small profits rate and 25% main rate continue, with marginal relief for profits between £50,000 and £250,000. However, dividend tax rates increased by 2 percentage points from April 2026 (basic rate from 8.75% to 10.75%, higher rate from 33.75% to 35.75%). This affects the optimal salary/dividend extraction strategy for directors, drawing the same level of dividends in 2026/27 costs approximately £600-£800 more in tax per year for a typical small company director taking £50,000 in dividends.
Related Calculators
Frequently Asked Questions
For 2026/27 the small profits rate is 19% on taxable profits up to £50,000, the main rate is 25% on profits over £250,000, and marginal relief applies in between. The rates are unchanged from the previous year.
A company with £100,000 of taxable profit pays £22,750 in corporation tax for 2026/27, an effective rate of 22.75%, because marginal relief sits it between the 19% and 25% rates.
Inside the £50,000 to £250,000 band, each extra £1 of profit is taxed at 26.5%, higher than the 25% headline, because the benefit of the 19% rate on the first £50,000 is gradually withdrawn as profits rise.
The £50,000 and £250,000 thresholds are divided by the number of associated companies. With two associated companies each has a £25,000 lower limit and a £125,000 upper limit, so the 25% rate starts sooner.
Marginal relief equals (£250,000 minus your profit) multiplied by 3/200. You work out tax at 25% on the full profit, then subtract the relief. At £100,000 that is £25,000 minus £2,250, which is £22,750.
Corporation tax is due nine months and one day after the end of your accounting period, and the company tax return is filed within twelve months of the period end.
Yes. Employer pension contributions are an allowable business expense, so they reduce taxable profit and can pull profit back under the £50,000 small profits threshold to secure the 19% rate.
No. Sole traders and partnerships pay income tax and National Insurance on their profits through self assessment, not corporation tax. Corporation tax applies only to limited companies and other incorporated bodies.
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James Hartley is a CIMA qualified financial analyst and Founder and Lead Financial Analyst at WhatsUK, with 8+ years in UK tax, payroll, and compliance. He builds every calculator on WhatsUK and authors all editorial content, ensuring every figure is verified against official HMRC sources before publication.
Sources & Official References
- GOV.UK: Corporation Tax rates- 19% small profits, 25% main rate
- HMRC: Marginal relief for corporation tax- Calculation method for £50k to £250k profits
- GOV.UK: Corporation Tax payment deadlines- Payment and filing deadlines
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Disclaimer: This calculator provides estimates based on standard HMRC rates for 2026/27. Results may vary based on individual circumstances. This is not financial advice. Always consult a qualified accountant or CIMA-qualified financial adviser for personal tax matters.