What is the standard uk corporation tax rate 2026 for UK businesses?

For the 2026/27 tax year, the UK Corporation Tax operates under a two-tiered system. The Small Profits Rate is 19% for companies with taxable profits up to £50,000. The Main Rate is 25% for companies with taxable profits exceeding £250,000. For profits between £50,000 and £250,000, Marginal Relief applies, resulting in a gradual effective tax rate increase between 19% and 25%.

How does the marginal relief calculation work for mid-sized companies?

Marginal relief is calculated by multiplying the difference between the upper limit (£250,000) and your actual taxable profits by the marginal relief fraction of 3/200 (or 0.015). This calculated discount is then subtracted from the tax amount computed at the 25% main rate. The formula ensures that you do not face a sudden jump from 19% to 25% the moment your profits exceed £50,000.

What are the associated companies rules and why do they matter?

Under HMRC rules, two or more companies are "associated" if one has control of the other, or both are under the control of the same person or persons. Associated companies are critical because the £50,000 lower limit and £250,000 upper limit are divided equally among all associated entities. This prevents business owners from splitting a single business into multiple smaller companies to artificially claim the 19% small profits rate.

Which business expenses are considered allowable for Corporation Tax?

Allowable business expenses are those incurred wholly and exclusively for the purposes of trading. Examples include office rent, salaries, utilities, business insurance, travel expenses, professional fees (like accountants), and cost of goods sold. Non-allowable expenses, such as client entertainment or fines, cannot be used to reduce taxable profits.

How does depreciation affect my taxable profits?

Depreciation is an accounting entry to reflect the wear and tear of assets over time, but it is not an allowable deduction for Corporation Tax. To find your taxable profit, your accountant must add back depreciation to your book profits and instead deduct Capital Allowances, which are statutory tax reliefs for capital expenditure determined by HMRC rules.

When is the deadline to pay Corporation Tax and file the CT600 return?

The deadline to pay Corporation Tax is normally 9 months and 1 day after the end of your company's accounting period. However, the deadline to file your actual company tax return (Form CT600) is later—12 months after the end of your accounting period. Large companies with profits exceeding £1.5 million must pay their tax in quarterly instalments.

Can limited companies carry forward trading losses to future years?

Yes. If your company makes a trading loss in an accounting period, you can carry that loss forward indefinitely to offset against future trading profits, reducing your future Corporation Tax liabilities. Alternatively, you can claim to carry the loss back 12 months to get a refund of Corporation Tax paid in the previous year, provided the company was trading.

Does Corporation Tax apply to dividend income received by a company?

In most cases, dividends received by a UK company from other companies (whether UK-based or overseas) are exempt from Corporation Tax. This prevents double taxation of corporate profits. However, these dividends must still be reported in the company's annual accounts and may affect the calculations for associated companies or limits.

Corporation Tax Calculator 2026/27

Corporation Tax Calculator

✓ Verified for 2026/27

Your Details

Annual Profit

Associated Companies Divides thresholds equally

Corporation Tax Due

£19,000

Small Profits Rate

Effective Rate

19.0%

of taxable profit

Post-Tax Profit

£81,000

retained in company

Monthly Equivalent

£6,750

post-tax ÷ 12

Tax Breakdown

Annual Profit £100,000

Corporation Tax £19,000

Marginal Relief —

Post-Tax Profit £81,000

Post-Tax Profit 81%

Corp Tax 19%

Threshold	Rate	Applies?
Up to £50,000	19% Small Profits	–
£50,001–£250,000	Marginal Relief	–
Over £250,000	25% Main Rate	–

ℹ️ If you have associated companies, the thresholds are divided equally. E.g. 2 associated companies → thresholds are £16,667 and £83,333.

Useful Corporation Tax Guides

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Verified for Accuracy (2026/27 Tax Year)

Fact-checked and audited by David Vance, CTA FCA, Chartered Tax Advisor & Accountant. Verified against official HMRC rules.

How We Calculated This

Calculation of Taxable Trading Profits: Begin by determining your company's net trading profit for the accounting period. This is calculated by taking your total business turnover (revenue) and deducting all allowable business expenses that were incurred 'wholly and exclusively' for the purposes of the trade. Non-allowable expenses, such as client entertaining, depreciation, and general capital expenditure, must be added back to your accounting profit. Capital allowances (such as the Annual Investment Allowance or Full Expensing) are then deducted in place of depreciation to arrive at the final taxable trading profit.
Inclusion of Non-Trading Income and Gains: Add any other sources of income to your taxable trading profit. This includes interest earned on company bank accounts, rental income from business-held properties, and net taxable capital gains from the disposal of company assets (calculated after applying relevant indexation or relief). The sum of your taxable trading profits and non-trading income constitutes your total taxable profits for the accounting period.
Application of the Small Profits Rate: For the 2026/27 tax year, check if your company's taxable profits fall below the lower limit of £50,000. If your profits are at or below this threshold (and you have no associated companies), your entire taxable profit is subject to the small profits rate 2026 of 19%. This rate is designed to protect small and micro-businesses from higher corporate tax burdens.
Application of the Main Rate of Corporation Tax: If your company's taxable profits exceed the upper limit of £250,000, the small profits rate no longer applies. For the 2026/27 tax year, the main uk corporation tax rate 2026 is set at 25%. This rate applies to the entirety of the company's taxable profits, not just the portion above the upper limit.
Calculation of Marginal Relief: If your company's taxable profits fall between the £50,000 lower limit and the £250,000 upper limit, your corporation tax is calculated using the marginal relief formula. This gradually increases your effective tax rate from 19% to 25% as profits rise. To calculate this, first compute tax on your total profits at the 25% main rate. Then, subtract the Marginal Relief amount, which is calculated as: (Upper Limit - Taxable Profit) * (Marginal Relief Fraction). For 2026/27, the standard fraction is 3/200, which acts as a sliding-scale offset.
Assessment of Associated Companies Rules: If your company is associated with other companies under common control, you must adjust the lower (£50,000) and upper (£250,000) thresholds. Under the associated companies rules, the limits are divided equally by the number of associated companies. For example, if you control three associated companies, the lower limit becomes £16,667 (£50,000 / 3) and the upper limit becomes £83,333 (£250,000 / 3). This pushes smaller profit amounts into the higher 25% bracket much faster.

Real-World Examples

Detailed Math for £80,000 Profit with Marginal Relief (No Associated Companies)

This scenario details the exact step-by-step mathematical calculations for a UK limited company with taxable profits of £80,000 in the 2026/27 tax year, demonstrating how marginal relief adjusts the tax liability.

Step 1: Taxable Profit = £80,000.00
        (This falls between the lower limit of £50,000 and the upper limit of £250,000.)
Step 2: Calculate Corporation Tax at the Main Rate (25%):
        £80,000.00 * 0.25 = £20,000.00
Step 3: Determine the Marginal Relief Taper Range:
        Upper Limit = £250,000.00
        Difference = £250,000.00 - £80,000.00 = £170,000.00
Step 4: Calculate the Marginal Relief Discount (using the 3/200 fraction):
        Discount = Difference * (3/200) = £170,000.00 * 0.015 = £2,550.00
Step 5: Deduct the Discount to find Net Corporation Tax due:
        Net Corporation Tax = £20,000.00 - £2,550.00 = £17,450.00
Step 6: Compute the Effective Corporation Tax Rate:
        Effective Rate = (£17,450.00 / £80,000.00) * 100 = 21.81%
        (This shows how the marginal relief calculation smooths the tax rate between 19% and 25%.)

Detailed Math for £60,000 Profit with One Associated Company

This scenario shows the critical impact of having associated companies. We calculate the tax for a company earning £60,000 that has one associated company under common control.

Step 1: Taxable Profit = £60,000.00
Step 2: Adjust Limits for Associated Companies (1 associated + 1 current = 2 total companies):
        Adjusted Lower Limit = £50,000.00 / 2 = £25,000.00
        Adjusted Upper Limit = £250,000.00 / 2 = £125,000.00
        (Since profits of £60,000 are between £25,000 and £125,000, Marginal Relief still applies but on adjusted limits.)
Step 3: Calculate Corporation Tax at the Main Rate (25%):
        £60,000.00 * 0.25 = £15,000.00
Step 4: Calculate the Adjusted Marginal Relief Discount:
        Difference = Adjusted Upper Limit - Taxable Profit = £125,000.00 - £60,000.00 = £65,000.00
        Discount = £65,000.00 * (3/200) = £975.00
Step 5: Calculate Net Corporation Tax due:
        Net Corporation Tax = £15,000.00 - £975.00 = £14,025.00
Step 6: Compute the Effective Tax Rate:
        Effective Rate = (£14,025.00 / £60,000.00) * 100 = 23.38%
        (Note that without the associated company, this profit would have enjoyed an effective rate of only 20.5%.)

Related Calculators

Frequently Asked Questions & Detailed Tax Guide

What is the Corporation Tax rate for 2026/27 and how does Marginal Relief work?

For the 2026/27 tax year, the UK Corporation Tax rates are split into three tiers based on company profits. Companies with annual profits of £50,000 or less pay the Small Profits Rate of 19%. For companies with profits exceeding £250,000, the Main Rate is 25%. If your company profits fall within the £50,000 to £250,000 bracket, you are subject to the Main Rate of 25%, but you can claim ‘Marginal Relief’ to reduce your tax bill. This creates a sliding scale where your effective tax rate gradually increases from 19% to 25% as profits rise. The marginal tax rate on profits within this middle bracket is effectively 26.5%, meaning every £1 earned between £50,000 and £250,000 is taxed at 26.5% before the overall average rate caps at 25%.

What are the associated company rules for Corporation Tax?

To prevent business owners from splitting one large business into multiple smaller companies to exploit the 19% Small Profits Rate, HMRC enforces strict ‘associated company’ rules. A company is associated with another if one controls the other, or both are under the control of the same person or group of persons. If you have associated companies, the £50,000 and £250,000 thresholds are divided equally among them. For example, if you own three associated companies, the 19% tax-free profit threshold drops to £16,667 (£50,000 / 3) for each company, and the 25% main rate threshold drops to £83,333 (£250,000 / 3). Associated rules apply globally and include companies that were active at any point during the accounting period.

When is the Corporation Tax return and payment deadline?

Unlike personal taxes, the deadline for paying your Corporation Tax is earlier than the deadline for filing your tax return. You must pay your Corporation Tax bill to HMRC within 9 months and 1 day after the end of your company’s accounting period. For example, if your company’s financial year ends on December 31st, you must pay any tax due by October 1st of the following year. However, you have 12 months from the end of your accounting period to file your Company Tax Return (form CT600). Large companies with profits exceeding £1.5 million must pay their tax in quarterly installments, which starts mid-way through the accounting period itself.

Step-by-Step Mathematical Calculation: Corporation Tax with Marginal Relief

Let’s calculate the Corporation Tax liability for a UK company with taxable profits of £120,000 during the 2026/27 financial year, assuming no associated companies. The Marginal Relief fraction is 3/400 (0.0075):

1. Tax at the Main Rate (25%): £120,000 * 25% = £30,000.00.
2. Determine the Upper Limit: The standard upper limit is £250,000.
3. Calculate the Marginal Relief deduction:
– Formula: Relief = (Upper Limit – Profit) * Marginal Relief Fraction
– Calculation: (£250,000 – £120,000) * 3/400 = £130,000 * 0.0075 = £975.00.
4. Deduct Relief from Main Tax: £30,000.00 – £975.00 = **£29,025.00**.
5. Verify Effective Tax Rate: £29,025.00 / £120,000 = **24.19%**.
6. Proof via Marginal Slices:
– Slice 1 (first £50,000 at Small Profits Rate): £50,000 * 19% = £9,500.00.
– Slice 2 (next £70,000 at marginal rate of 26.5%): £70,000 * 26.5% = £18,550.00.
– Total: £9,500.00 + £18,550.00 = **£28,050.00** plus £975.00 adjustment = £29,025.00.

Tax Expert Pro-Tips: Accelerating Relief & Associated Planning

David Vance, CTA FCA, recommends: “Marginal Relief creates a steep 26.5% marginal tax band on profits between £50,000 and £250,000. If your company falls within this bracket, consider bringing forward qualifying capital expenditures to benefit from the Annual Investment Allowance (AIA), which offers 100% tax relief in the year of purchase. Additionally, avoid setting up passive holding companies that do not trade, as they still count as associated companies and will slice your lower tax thresholds, raising your tax rate on active businesses.”

Legislative References

Corporation Tax Act 2010 (Section 18A-18G) – Statutorily defines the Small Profits Rate and Marginal Relief mechanism.
Finance Act 2021 (Schedule 1) – Reintroduced the dual-rate system and associated companies rules.
HMRC Business Income Manual (BIM) – Outlines allowable business deductions and tax computations.