Corporation Tax applies to all UK limited companies, including dormant ones. Since April 2023, the rate has depended on your profit level — with a 6 percentage point gap between the smallest and largest companies. Here are the current rates and thresholds for 2026/27.
Corporation Tax Rates 2026/27
| Profit level | Tax rate | Effective rate |
|---|---|---|
| Up to £50,000 | 19% (small profits rate) | 19% |
| £50,001–£250,000 | 25% with marginal relief | 19%–25% |
| Over £250,000 | 25% (main rate) | 25% |
Associated Companies Warning
The £50,000 and £250,000 thresholds are divided by the number of associated companies you control. If you have two associated companies, the small profits threshold drops to £25,000 each, and the upper limit drops to £125,000 each.
Associated companies include any companies controlled by the same person or group of persons. Dormant companies with no assets can be excluded.
Corporation Tax Rate History
| Tax year | Main rate | Small profits rate | Small profits threshold |
|---|---|---|---|
| 2026/27 | 25% | 19% | £50,000 |
| 2025/26 | 25% | 19% | £50,000 |
| 2024/25 | 25% | 19% | £50,000 |
| 2023/24 | 25% | 19% | £50,000 |
| 2022/23 | 19% | 19% (flat rate) | N/A |
| 2021/22 | 19% | 19% (flat rate) | N/A |
| 2020/21 | 19% | 19% (flat rate) | N/A |
Corporation Tax was a flat 19% from April 2017 to March 2023. The reintroduction of the small profits rate in April 2023 created a two-tier system for the first time in years.
How Marginal Relief Works
For profits between £50,000 and £250,000, you don’t pay a flat 25%. Instead, marginal relief reduces your bill using this formula:
Marginal relief = (Upper limit − Profits) × Profits/Profits × 3/200
In practice, HMRC’s online calculator handles this for you. Here are the effective rates at key profit levels:
| Taxable profit | Corporation Tax | Effective rate | Marginal rate on last £1 |
|---|---|---|---|
| £50,000 | £9,500 | 19.00% | 19.00% |
| £75,000 | £15,188 | 20.25% | 26.50% |
| £100,000 | £21,250 | 21.25% | 26.50% |
| £125,000 | £27,500 | 22.00% | 26.50% |
| £150,000 | £33,750 | 22.50% | 26.50% |
| £175,000 | £40,000 | 22.86% | 26.50% |
| £200,000 | £46,250 | 23.13% | 26.50% |
| £250,000 | £62,500 | 25.00% | 25.00% |
| £500,000 | £125,000 | 25.00% | 25.00% |
The 26.5% Marginal Rate Trap
Between £50,000 and £250,000 profits, every additional £1 of profit is effectively taxed at 26.5% — higher than the headline 25% rate. This is because each extra pound of profit not only attracts tax itself but also reduces the marginal relief available.
This matters for decisions about:
- Timing of expenses — bringing forward costs to stay below £250,000 or £50,000
- Pension contributions — employer contributions reduce taxable profits
- Capital allowances — claiming them in the right year
Corporation Tax vs Self-Employment Tax
Many sole traders consider incorporating to save tax. Here’s how the two compare at different profit levels:
| Profit | Self-employed tax + NI | Ltd company tax (salary + dividends) | Saving from Ltd |
|---|---|---|---|
| £30,000 | £5,086 | £2,843 | £2,243 |
| £50,000 | £11,086 | £7,338 | £3,748 |
| £75,000 | £21,086 | £13,463 | £7,623 |
| £100,000 | £31,586 | £20,750 | £10,836 |
Ltd company figures assume optimal salary of £12,570 plus dividends, accounting for both Corporation Tax and personal dividend tax. Figures are approximate.
The tax saving from incorporating grows with profit, but you must also factor in:
- Accountancy fees — typically £1,000–£3,000 per year for a Ltd company
- Filing obligations — annual accounts, confirmation statement, CT600
- Dividend extraction — money in the company isn’t yours until you take it out
- IR35 risk — if you’re caught by IR35, the tax advantages largely disappear
See the Salary Sacrifice Guide and Dividend vs Salary Calculator for optimising your director’s pay.
Key Allowances That Reduce Corporation Tax
| Allowance | What it covers | Effect |
|---|---|---|
| Annual Investment Allowance (AIA) | Plant, machinery, equipment | 100% deduction on first £1 million of qualifying expenditure |
| Full expensing | Plant and machinery (main pool) | 100% first-year deduction (no cap) |
| 50% first-year allowance | Special rate items (long-life assets) | 50% deduction in year one |
| R&D tax credits | Research and development costs | Enhanced deduction or cash credit |
| Patent Box | Profits from patented innovations | Effective 10% rate on qualifying profits |
| Employer pension contributions | Pension payments for staff/directors | Fully deductible as a business expense |
| Trading losses | Losses from current or previous years | Carry back 1 year or carry forward indefinitely |
Full expensing was made permanent from April 2024 and is one of the most generous capital investment reliefs in the developed world.
Corporation Tax Payment Deadlines
Standard Companies (Profits under £1.5 million)
| Event | Deadline |
|---|---|
| Tax payment | 9 months and 1 day after accounting period end |
| CT600 filing | 12 months after accounting period end |
Example for 31 March 2027 year end:
- Payment due: 1 January 2028
- CT600 due: 31 March 2028
Large Companies (Profits over £1.5 million)
Large companies pay Corporation Tax in quarterly instalments:
| Instalment | Due date (for 31 March year end) |
|---|---|
| 1st instalment | 14 October 2026 |
| 2nd instalment | 14 January 2027 |
| 3rd instalment | 14 April 2027 |
| 4th instalment | 14 July 2027 |
Very Large Companies (Profits over £20 million)
Very large companies pay in quarterly instalments starting in the current accounting period (3 months earlier than large companies).
Penalties for Late Filing and Payment
| Offence | Penalty |
|---|---|
| CT600 1 day late | £100 |
| CT600 3 months late | Another £100 |
| CT600 6 months late | 10% of unpaid tax (minimum £100) |
| CT600 12 months late | Further 10% of unpaid tax |
| Late payment | Interest at Bank of England base rate + 2.5% |
Corporation Tax and Dividends
After paying Corporation Tax, the remaining profit can be distributed to shareholders as dividends. These are then taxed personally at dividend tax rates.
| Stage | Rate |
|---|---|
| Company profit | Taxed at 19%–25% (Corporation Tax) |
| Dividend to shareholder | Taxed at 8.75%–39.35% (after £500 allowance) |
| Combined effective rate (basic rate shareholder) | ~25.9% |
| Combined effective rate (higher rate shareholder) | ~46.3% |
| Combined effective rate (additional rate shareholder) | ~54.5% |
Even with double taxation, the combined rate for basic-rate shareholders is lower than the equivalent self-employment tax rate at most profit levels.
Key Dates for 2026/27
| Date | Event |
|---|---|
| 1 April 2026 | Corporation Tax year starts (financial year basis) |
| 31 March 2027 | Corporation Tax year ends |
| CT600 deadlines | 12 months after your accounting period end |
| Payment deadlines | 9 months + 1 day after accounting period end |