Published: June 2026 | Fact-Checked & Audited By: David Vance, CTA FCA (Chartered Tax Advisor & Accountant)
This guide is fully updated for the 2026/27 HMRC tax year. All calculations and tax rules have been audited against official UK legislation.
Running a Limited Company in the UK brings several tax advantages, but it also means you are responsible for paying Corporation Tax on your company’s profits. For the 2026/27 tax year, the UK continues to use a tiered corporate tax system, dividing companies between the Small Profits Rate (19%) and the Main Rate (25%), with Marginal Relief acting as a bridge between the two. Understanding how these rates interact is vital for accurate financial planning. Let’s break down exactly how Corporation Tax is calculated, what rates apply to your business, and how to optimize your taxable profits.
HMRC Corporation Tax Rates for 2026/27
Your company’s tax liability depends entirely on its taxable profits (gross revenue minus allowable business expenses and capital allowances) during its accounting period. The rates are structured as follows:
| Taxable Profit Bracket | Applicable Corporation Tax Rate | Description |
|---|---|---|
| Up to £50,000 | 19% (Small Profits Rate) | Applies to small, standalone UK companies. |
| £50,001 to £250,000 | Marginal Relief (Effective rate sliding between 19% and 25%) | Bridges the gap to prevent a sudden jump in tax. |
| Above £250,000 | 25% (Main Rate) | Applies to all profits once they exceed £250,000. |
Step-by-Step Calculation: An Example
Let’s look at how Corporation Tax is calculated for three different companies:
Company A (Profits of £40,000): Since profits are below the lower threshold (£50,000), the calculation is straightforward. Company A pays the Small Profits Rate of 19%.
Tax due: £40,000 * 19% = £7,600.00.
Company B (Profits of £300,000): Since profits are above the upper threshold (£250,000), Company B pays the Main Rate of 25% on the entire profit amount.
Tax due: £300,000 * 25% = £75,000.00.
Company C (Profits of £120,000): Because profits fall in the middle bracket, Company C pays the Main Rate (25%) on all profits, but then applies a **Marginal Relief deduction** to lower their tax bill. For a quick estimation of this, use our interactive Corporation Tax Calculator.
Tax Planning and Profit Extraction
Limited Company directors can lower their Corporation Tax by claiming all allowable business expenses (e.g., equipment, travel, office space) and utilizing capital allowances. Additionally, you can tax-efficiently extract profits by paying yourself a low salary combined with dividend distributions. To model the optimal salary-dividend split and estimate your personal tax liabilities, use our Optimal Director Split Calculator or our Small Business Tax Planner.
Frequently Asked Questions: Corporation Tax Basics
Q: What is the UK Corporation Tax rate for 2026/27?
A: For 2026/27, the Small Profits Rate is 19% for profits up to £50,000, and the Main Rate is 25% for profits above £250,000. Profits in between these thresholds are subject to Marginal Relief, which scales the tax rate between 19% and 25%.
Q: How do business expenses reduce Corporation Tax?
A: Allowable business expenses are deducted from your company’s gross revenue, lowering your net taxable profits. Since Corporation Tax is calculated only on net profits, claiming all legitimate expenses directly reduces your tax bill.
Q: Do I pay Corporation Tax on dividend payments?
A: No, dividends are paid out of post-tax profits, meaning your company has already paid Corporation Tax on those earnings. However, you may owe personal Dividend Tax on those distributions depending on your income tax band.