UK Corporation Tax rates: current rates explained

A standalone company with augmented profits of £50,000 or less generally pays the 19% small profits rate. Above £250,000 it pays the 25% main rate. Between the limits, marginal relief reduces the main rate bill.

For example, taxable profit of £100,000 with no distributions from unrelated companies gives tax of £22,750 under the standard marginal relief formula, an average rate of 22.75%.

Inside the marginal relief band, an extra pound of profit can carry an effective 26.5% Corporation Tax cost. This is not a separate published rate, it is the effect of marginal relief being withdrawn as profit rises.

A deductible employer pension contribution, qualifying salary cost or capital allowance can therefore save tax at 26.5% while profit sits in this band, subject to the normal rules.

The £50,000 and £250,000 limits are divided by the number of associated companies. Two associated companies generally reduce each company's limits to £25,000 and £125,000. Control by the same person or connected people can create association even where the trades are different.

The limits are also proportionately reduced for an accounting period shorter than 12 months. Group structure and period length must be entered correctly in the CT600 computation.

Start with accounting profit, add back non-deductible costs such as depreciation and client entertaining, then deduct capital allowances, reliefs and allowable losses. Certain distributions are included in augmented profits when deciding which rate applies.

Dividends paid to shareholders do not reduce Corporation Tax. Director salary and employer pension contributions can be deductible when they are wholly and exclusively for the trade and properly recorded.

A tax reserve based only on 19% can leave a cash gap when profits enter marginal relief. Update the forecast during the year and include associated companies, chargeable gains, loss relief and planned capital expenditure.

Rates and deadlines are reviewed for 2026/27, but HMRC interest rates and individual circumstances can change the result. Check the linked official guidance or ask us before acting.