Since April 2023, UK corporation tax has operated on a two-rate system. Small companies with profits under £50,000 pay 19%; companies above £250,000 pay 25%. Between those thresholds, a marginal relief mechanism applies — and if you control more than one company, your thresholds are divided, which catches many non-resident founders off guard. Here is how it all works.
UK Corporation Tax Rates at a Glance
- Small profits rate: 19% — profits up to £50,000
- Main rate: 25% — profits above £250,000
- Marginal relief band: £50,001–£250,000 (effective marginal rate ~26.5%)
- Thresholds divided by number of associated companies
- Payment deadline: 9 months and 1 day after accounting period end
The two-rate system
From 1 April 2023, HMRC introduced a two-rate corporation tax structure replacing the previous flat 19% rate:
| Taxable profits | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 – £250,000 | Marginal relief (effective ~19%–25%) |
| Above £250,000 | 25% (main rate) |
Taxable profits include trading income, investment income (interest, rent), and chargeable gains, minus allowable deductions, capital allowances and losses. For most small companies, taxable profits roughly equal accounting profit before tax minus capital allowances.
If your accounting period is less than 12 months (common for newly incorporated companies), the £50,000 and £250,000 thresholds are reduced proportionally.
How marginal relief works
Marginal relief gives back some of the extra tax charged at 25% for companies in the £50,000–£250,000 band. The formula is:
Marginal Relief = (£250,000 − taxable profits) × (taxable profits ÷ augmented profits) × 3/200
For a company with no investment income or associated companies, "augmented profits" equals taxable profits, which simplifies the calculation.
The practical effect: the marginal rate on each pound of profit between £50,000 and £250,000 is approximately 26.5% — higher than the headline main rate of 25%. This is a known quirk of the system worth being aware of when planning profit extraction.
Worked examples
| Taxable profits | Calculation | Tax due | Effective rate |
|---|---|---|---|
| £30,000 | £30,000 × 19% | £5,700 | 19.0% |
| £50,000 | £50,000 × 19% | £9,500 | 19.0% |
| £100,000 | £25,000 − marginal relief £2,250 | £22,750 | 22.75% |
| £150,000 | £37,500 − marginal relief £1,500 | £36,000 | 24.0% |
| £250,000 | £62,500 − no relief | £62,500 | 25.0% |
| £400,000 | £400,000 × 25% | £100,000 | 25.0% |
Associated companies
This is where non-resident founders with multiple companies often get caught out. If two or more companies are associated — broadly, under common control by the same person or group — the corporation tax thresholds are divided equally between them.
Two associated companies: thresholds become £25,000 / £125,000 each.
Three associated companies: thresholds become £16,667 / £83,333 each.
Companies are associated if one controls the other, or both are under common control. "Control" is defined as owning more than 50% of the ordinary share capital, voting rights, or rights to distributable income.
Practical impact: a founder who controls two UK companies, each making £40,000 profit, would expect to pay 19% on each. But with two associated companies, the threshold drops to £25,000 — so both companies have profits in the marginal relief band (£25,001–£125,000), resulting in a higher effective rate than expected.
When corporation tax is due
For companies with annual taxable profits under £1.5m (the vast majority of small companies), corporation tax is due 9 months and 1 day after the end of the accounting period. This is earlier than the CT600 filing deadline of 12 months.
| Accounting period end | CT600 filing deadline | Tax payment deadline |
|---|---|---|
| 31 March 2026 | 31 March 2027 | 1 January 2027 |
| 31 December 2025 | 31 December 2026 | 1 October 2026 |
| 30 April 2026 | 30 April 2027 | 1 February 2027 |
HMRC charges interest on late payments from the payment deadline date. Penalties for late CT600 filing apply separately.
How to reduce your corporation tax bill
- Capital allowances: claim the Annual Investment Allowance (AIA — £1m per year) on qualifying plant and machinery purchases; deducted in full in the year of purchase.
- Director salary: salary is a deductible expense — paying a director salary up to the NI Primary Threshold (£12,570) reduces taxable profit by that amount, saving ~£2,388 in corporation tax at 19%.
- Pension contributions: employer pension contributions are deductible; no NI on employer contributions.
- R&D tax credits: if your company carries out qualifying R&D, claim the merged RDEC scheme (20% above-the-line credit) — see our R&D guide.
- Losses: trading losses can be carried back one year or forward indefinitely against future profits of the same trade.
Further reading: UK Tax for Non-Residents: Complete Guide Getting UK Company Profits to China: Tax-Efficient Methods.
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View company packagesFAQ
What is the UK corporation tax rate for 2026?
19% on profits up to £50,000 (small profits rate); 25% on profits above £250,000 (main rate); marginal relief applies between £50,001 and £250,000, giving an effective rate between 19% and 25%.
What is marginal relief?
A calculation that reduces the corporation tax bill for companies with profits between £50,000 and £250,000. The marginal rate on profits in this band is ~26.5% — slightly above the 25% main rate.
How do associated companies affect my tax thresholds?
The £50,000 and £250,000 thresholds are divided by the number of associated companies. Two associated companies each get a £25,000 / £125,000 threshold — pushing companies into the marginal relief band sooner than expected.
When does a UK company pay corporation tax?
9 months and 1 day after the accounting period ends — earlier than the CT600 filing deadline of 12 months. Interest applies on late payments from the due date.