There are two corporation tax rates and one relief that sits between them. 19% on profits up to £50,000. 25% on profits above £250,000. Between those two figures, Marginal Relief tapers the 25% rate down — and produces an effective marginal rate of 26.5% on every pound in the band.
Those rates are unchanged from last year. What changes is how much of your profit sits in each band, and whether you have associated companies quietly cutting the limits in half.
First, a note on “2026/27”
Corporation tax does not run on the 6 April to 5 April tax year. It runs on financial years that start on 1 April.
Financial Year 2026 runs from 1 April 2026 to 31 March 2027. If someone tells you the “2026/27 corporation tax rate”, they mean FY2026. If your accounting period is 1 January to 31 December, it straddles two financial years and you would normally have to apportion the profit between them.
The good news this year: the rates and limits for FY2025 and FY2026 are identical, so a straddling period needs no apportionment for rate purposes. That will not always be true. Finance Act 2026 confirms FY2027 at a 25% main rate, a 19% small profits rate and a 3/200 marginal relief fraction, with the £50,000 and £250,000 limits unchanged in CTA 2010.
The rates
| Taxable profits | Rate | What you actually pay |
|---|---|---|
| £0 – £50,000 | Small profits rate 19% | 19% of the whole amount |
| £50,001 – £250,000 | Main rate 25%, reduced by Marginal Relief | Effective rate rises gradually from 19% to 25% |
| Over £250,000 | Main rate 25% | 25% of the whole amount |
The £50,000 figure is the lower limit. The £250,000 figure is the upper limit. Marginal Relief is calculated using a standard fraction of 3/200.
The 25% rate is not a band rate. This trips people up constantly. If your profits are £260,000, you do not pay 19% on the first £50,000 and 25% on the rest. You pay 25% on all £260,000, because you have gone over the upper limit and Marginal Relief is no longer available at all.
What the tax actually costs at each profit level
Every figure below is calculated on a full 12-month accounting period with no associated companies.
| Taxable profits | Corporation tax | Effective rate |
|---|---|---|
| £30,000 | £5,700 | 19.00% |
| £50,000 | £9,500 | 19.00% |
| £60,000 | £12,150 | 20.25% |
| £75,000 | £16,125 | 21.50% |
| £100,000 | £22,750 | 22.75% |
| £150,000 | £36,000 | 24.00% |
| £200,000 | £49,250 | 24.63% |
| £250,000 | £62,500 | 25.00% |
| £300,000 | £75,000 | 25.00% |
| £500,000 | £125,000 | 25.00% |
Worked example: £100,000 of profit
- Tax at the main rate: 25% × £100,000 = £25,000
- Marginal Relief: 3/200 × (£250,000 − £100,000) = 0.015 × £150,000 = £2,250
- Corporation tax due: £25,000 − £2,250 = £22,750
Cross-check it the other way: 19% on the first £50,000 is £9,500, and 26.5% on the next £50,000 is £13,250. Total £22,750. Same answer.
Worked example: £60,000 of profit
- Tax at the main rate: 25% × £60,000 = £15,000
- Marginal Relief: 0.015 × (£250,000 − £60,000) = £2,850
- Corporation tax due: £12,150
That is 20.25% overall — but the £10,000 of profit above £50,000 was taxed at 26.5%. Earning that extra £10,000 cost £2,650 in corporation tax, not £1,900.
Why 26.5%? Every extra £1 of profit inside the band is taxed at 25% and simultaneously reduces your Marginal Relief by 1.5p (3/200 of £1). 25p plus 1.5p is 26.5p. It is the highest marginal rate anywhere in the corporation tax system — higher than the 25% paid by companies making millions.
Associated companies divide the limits
This is the single most expensive thing directors miss.
The £50,000 and £250,000 limits are divided by the number of associated companies, including the company itself. Three associates plus the company makes four, so the limits become £12,500 and £62,500.
| Associated companies (including itself) | Lower limit | Upper limit |
|---|---|---|
| 1 | £50,000 | £250,000 |
| 2 | £25,000 | £125,000 |
| 3 | £16,667 | £83,333 |
| 4 | £12,500 | £62,500 |
A company with £60,000 of profit and no associates pays £12,150. The same company with one associated company faces limits of £25,000 and £125,000:
- 25% × £60,000 = £15,000
- Marginal Relief: 0.015 × (£125,000 − £60,000) = £975
- Corporation tax due: £14,025
An extra £1,875 of tax, on identical profits, because of a second company somewhere in the structure. Companies are broadly associated where one controls the other, or both are under the control of the same person or persons. Dormant companies are generally left out, but the definition is wider than most directors assume — it reaches personal holding companies and companies owned by close relatives in some circumstances.
Short accounting periods
The limits are pro-rated for accounting periods shorter than 12 months. A six-month period gets a lower limit of £25,000 and an upper limit of £125,000.
This matters most in a company’s first year, where a long first period of account is split into two corporation tax accounting periods — one of 12 months and one short stub. The stub period gets a proportionately tiny set of limits.
Who cannot claim Marginal Relief
Three exclusions:
- Non-UK resident companies
- Close investment holding companies — broadly, close companies that exist to hold investments rather than trade
- Any company whose augmented profits exceed £250,000, where augmented profits include certain distributions received from unrelated, unassociated companies
If any of these apply, the 25% main rate applies to the whole profit.
Frequently asked questions
Has the corporation tax rate changed for 2026/27?
No. The small profits rate remains 19%, the main rate remains 25%, and the lower and upper limits remain £50,000 and £250,000. The rates and limits for Financial Year 2026 are identical to Financial Year 2025, which means accounting periods straddling 1 April 2026 need no apportionment for rate purposes.
Do I pay 19% on the first £50,000 if my profits are £300,000?
No. Once your augmented profits exceed £250,000 you lose Marginal Relief entirely and the 25% main rate applies to the whole amount. Profits of £300,000 produce a corporation tax bill of £75,000.
What is the effective corporation tax rate between £50,000 and £250,000?
The marginal rate on profit inside the band is 26.5%. The overall effective rate on total profits rises gradually from 19% at £50,000 to 25% at £250,000 — for example 22.75% at £100,000 and 24% at £150,000.
How do associated companies affect my corporation tax?
The £50,000 and £250,000 limits are divided by the number of associated companies including the company itself. Three associates plus the company means the limits become £12,500 and £62,500, which can push a small company into the marginal band or onto the full 25% rate.
Does corporation tax apply to turnover or profit?
Profit. Corporation tax is charged on taxable profits, which are your accounting profits adjusted for tax purposes — disallowable costs added back, capital allowances deducted, and any reliefs applied. Turnover is irrelevant to the rate.
Getting the number right
The rate is the easy part. The number that goes into the calculation is where returns go wrong: depreciation that should have been added back, capital allowances that were never claimed, associated companies nobody flagged.
SmartFiling prepares and files CT600 returns on a fixed fee, including the corporation tax computation, capital allowances, Marginal Relief and HMRC submission, with a three-week turnaround from receiving your records. Every return is reviewed and signed off by an ICAEW Chartered Accountant.
