Corporation tax is charged on the profits of UK-registered companies and foreign companies with a UK branch. The rate you pay depends on your profit level — and since April 2023, the two-rate system with marginal relief has made the calculation more complex than a simple percentage.
For the full PocketWise guide to running a limited company (including salary vs dividend extraction, IR35, and sole trader vs limited company comparison), see the Self-Employment Hub.
Corporation tax rates 2026/27
The accounting year covered by 2026/27 rates runs from 1 April 2026 to 31 March 2027 (or proportional periods for companies with different year-ends).
| Profit level | Rate | Notes |
|---|---|---|
| Up to £50,000 | 19% (small profits rate) | Applies to the full profit amount |
| £50,001 – £250,000 | 19%–25% (marginal relief) | Effective rate varies by profit level |
| Over £250,000 | 25% (main rate) | Applies to the full profit amount |
Important: If you have associated companies, the thresholds are divided by the number of associated companies (including yours). See below.
Calculating corporation tax: step by step
Companies below £50,000 profit
Tax = Taxable profit × 19%
| Taxable profit | Corporation tax (19%) |
|---|---|
| £10,000 | £1,900 |
| £20,000 | £3,800 |
| £30,000 | £5,700 |
| £40,000 | £7,600 |
| £50,000 | £9,500 |
Companies above £250,000 profit
Tax = Taxable profit × 25%
| Taxable profit | Corporation tax (25%) |
|---|---|
| £300,000 | £75,000 |
| £500,000 | £125,000 |
| £1,000,000 | £250,000 |
Companies with profits between £50,000 and £250,000 (marginal relief)
For companies in the marginal relief band:
Tax = (Taxable profit × 25%) − Marginal relief deduction
Marginal relief deduction = (£250,000 − taxable profit) × 3/200
(This formula assumes augmented profits equal taxable profits, which is the case for most small companies with no dividend income from other companies.)
| Taxable profit | Tax at 25% | Marginal relief | Net tax | Effective rate |
|---|---|---|---|---|
| £50,000 | £12,500 | £3,000 | £9,500 | 19.0% |
| £75,000 | £18,750 | £2,625 | £16,125 | 21.5% |
| £100,000 | £25,000 | £2,250 | £22,750 | 22.75% |
| £125,000 | £31,250 | £1,875 | £29,375 | 23.5% |
| £150,000 | £37,500 | £1,500 | £36,000 | 24.0% |
| £175,000 | £43,750 | £1,125 | £42,625 | 24.36% |
| £200,000 | £50,000 | £750 | £49,250 | 24.63% |
| £225,000 | £56,250 | £375 | £55,875 | 24.83% |
| £250,000 | £62,500 | £0 | £62,500 | 25.0% |
Associated companies: a critical trap
The profit thresholds are divided by the total number of associated companies (including the company being assessed).
Two companies are associated if:
- One controls the other
- Both are controlled by the same person or group of persons
Example: You own Company A and Company B. Both are associated.
- The £50,000 threshold becomes £25,000 (£50,000 ÷ 2)
- The £250,000 threshold becomes £125,000 (£250,000 ÷ 2)
- Company A with £40,000 profit now falls in the marginal relief band (above £25,000), not the small profits rate
This is a significant issue for entrepreneurs who own multiple limited companies. Even dormant companies can count as associated if they’re under common control — only companies that have not been incorporated, or that are under different beneficial ownership, are excluded.
What counts as taxable profit
Taxable profit is your accounting profit adjusted for:
Additions (items that are not deductible for tax):
- Client entertainment
- Depreciation (replaced by capital allowances)
- Fines and penalties
- Personal expenses charged through the company
Deductions (items deductible for tax but perhaps not in accounts):
- Capital allowances (instead of depreciation)
- R&D relief (if eligible)
- Patent Box profits (if applicable)
Key allowable deductions:
- Director/employee salaries and employer NIC
- Rent, utilities, and business premises costs
- Professional fees and subscriptions
- Business insurance
- Equipment (via capital allowances — 100% Annual Investment Allowance for qualifying plant and machinery up to £1 million per year)
Reducing your corporation tax bill
Salary vs dividend planning
The classic director-shareholder structure:
- Salary at the secondary NIC threshold (£5,000 in 2026/27): fully deductible from profits, reduces corporation tax. No employer NIC below this point. The director uses their personal allowance (£12,570) — the gap between the NIC threshold and the personal allowance (£7,570) means no income tax is paid on the salary portion, but there’s no NI credit either.
- Dividends for remaining profit: paid from post-tax profits, taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate)
The optimal extraction strategy depends on your total income and tax position. See the Dividend Tax Calculator for a worked director extraction example.
Pension contributions
Company contributions to a director’s pension are fully deductible and do not count as a benefit in kind. This is often the most tax-efficient extraction method for higher-rate taxpayers — contributions reduce corporation tax at 25% (or 19%), and the director receives tax-free pension growth.
Research and Development (R&D) relief
If your company carries out qualifying R&D activities, you may be able to claim enhanced deductions on qualifying costs. The SME R&D scheme and the R&D Expenditure Credit (RDEC) for larger companies offer different benefit rates. HMRC has increased scrutiny of R&D claims since 2023 — specialist advice is strongly recommended.
Corporation tax payment deadlines
| Company size | When tax is due |
|---|---|
| Small companies (profits ≤ £1.5m) | 9 months and 1 day after accounting period end |
| Large companies (profits > £1.5m) | Quarterly instalments during the accounting year |
Filing: The CT600 Company Tax Return must be filed with HMRC within 12 months of the accounting period end. Automatic penalties apply for late filing.
Related guides
- Dividend Tax Calculator — optimal salary and dividend split
- VAT Calculator — VAT registration and calculation
- Self-Employment Hub — sole trader vs limited company
- Tax Calculators Hub