Definition
Companies are associated for Corporation Tax if one controls the other or both are controlled by the same person or group of persons, such as two companies owned by the same director. The £50,000 small profits limit and £250,000 Marginal Relief limit are divided by the number of associated companies plus one, so owning several companies can push each into a higher effective rate.
How the rules work
- Control broadly means holding most of the shares, votes or rights to assets, including through nominees.
- A company counts even if it was associated for only part of the accounting period, wherever it is tax resident.
- An associated company that carried on no trade or business in the period, such as a dormant company, is ignored. So is a passive holding company that only holds shares in its subsidiaries and passes their dividends on.
- Companies controlled by relatives or business partners count only where there is substantial commercial interdependence between them.
Example
Jo owns all the shares in two trading companies. Each company has one associated company, so its limits fall to £25,000 and £125,000. A company making £40,000 of profit therefore pays £8,725 after Marginal Relief, instead of £7,600 at 19%.
The formula is set out in Marginal Relief and the shared limits, and the 2026/27 rates guide has a section on associated companies dividing the limits.
Related questions
- How much is Corporation Tax in 2026/27? 19% up to £50,000 and 25% over £250,000, with both limits divided between associated companies.
- What is Marginal Relief? The reduction that phases the rate in between the two limits.
Related terms
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Small profits rate
The small profits rate is the 19% rate of Corporation Tax for companies with profits of £50,000 or less in a 12-month accounting period.
Read definition -
Marginal Relief
Marginal Relief is a reduction in Corporation Tax for companies with profits between £50,000 and £250,000.
Read definition -
Corporation Tax
Corporation Tax is the tax UK limited companies pay to HM Revenue and Customs (HMRC) on their taxable profits.
Read definition
