Corporation Tax Rates and How Marginal Relief Works

UK corporation tax rates for the financial year starting 1 April 2026 are 19% for a qualifying UK-resident company with profits of £50,000 or less and 25% where profits are above £250,000. In between, the bill is worked out at 25% and then reduced by marginal relief.

Here’s the odd part: for a company with no dividends coming in, each extra £1 of profit inside its marginal relief band faces a 26.5% marginal rate. That’s a steeper charge than a company above the band pays on its extra profit.

The headline corporation tax rates aren’t the whole story. Associated companies and short accounting periods can pull the limits your company works to below £50,000 and £250,000.

This guide shows how corporation tax marginal relief is worked out, where the 26.5% comes from and how dividends your company receives can push it into a dearer band.

If you’re new to the tax itself, the guide to what corporation tax is explains who pays it and how taxable profits are worked out. Oil and gas ring fence profits have their own rates, covered near the end.

Corporation tax rates turn on two profit limits

GOV.UK’s Corporation Tax rates and allowances table gives these figures for the financial year starting 1 April 2026, and they’ve stayed the same since 1 April 2023:

• At £50,000 of profit or below, tax is charged at the 19% small profits rate.
• The main rate is 25%, charged in full where profits are above £250,000.
• Marginal relief reduces the main-rate bill where profits are above £50,000 but no more than £250,000.
• The standard fraction used in the marginal relief formula is 3/200.

If you’ve been looking for the corporation tax rate for small companies, its official name is the small profits rate.

A limited company corporation tax rate is worked out from these same figures, and the other taxes a company and its directors deal with are covered across the site’s tax rebate guides.

The corporation tax small profits rate is charged on the whole of a qualifying company’s taxable total profits. GOV.UK’s table lists no band below it.

The corporation tax upper and lower limits are tested against augmented profits, explained below, and they can be smaller than the headline amounts.

Rates are set for financial years starting on 1 April, but your company pays at the rates that applied in its own accounting period. Where more than one rate applies within a period, GOV.UK’s method is to count the days under each rate and work out the tax on each part.

A single rate applied to all companies from 1 April 2015 to 31 March 2023, and for profits outside the ring fence it was 19% in the financial year starting 1 April 2022.

How corporation tax marginal relief trims the bill

Marginal relief works on the whole bill. The company’s taxable profits are taxed at 25%, and the relief is then taken off that tax.

The Corporation Tax Act 2010 builds the relief from four figures:

• F is the standard fraction, which has been 3/200 for every financial year since 1 April 2023.
• U is the upper limit, which is £250,000 for a company with no associated companies and a 12-month period.
• A is the company’s augmented profits for the accounting period.
• N is the company’s taxable total profits for the accounting period.

Relief is F × (U − A) × N/A. Where the company receives no qualifying dividends, A and N are the same, and the sum becomes 3/200 × (£250,000 − profit).

At the rates and limits above, with no associated companies, a 12-month period and no dividends received, the formula gives these results:

• Profit of £60,000 leads to tax of £12,150, an effective rate of 20.25%.
• Profit of £90,000 leads to tax of £20,100, an effective rate of about 22.33%.
• Profit of £125,000 leads to tax of £29,375, an effective rate of 23.5%.
• Profit of £175,000 leads to tax of £42,625, an effective rate of about 24.36%.
• Profit of £225,000 leads to tax of £55,875, an effective rate of about 24.83%.

An effective corporation tax rate is the whole bill divided by the whole profit, which is why it climbs gradually towards 25% across the band.

HMRC’s Marginal Relief for Corporation Tax guidance links to an online calculator for profits from 1 April 2023.

Why the 26.5% marginal rate tops 25%

Where no dividends come in, each extra £1 of profit inside the band adds 25p of tax at the main rate. It also takes 1.5p off the relief, because 3/200 of a pound is 1.5p, and relief you lose costs the same as tax you pay.

Put side by side, the same extra £10,000 of profit costs different amounts depending on where it lands:

• A company going from £20,000 to £30,000 of profit pays £1,900 more, all of it at 19%.
• A company going from £100,000 to £110,000 pays £2,650 more, because the extra profit sits inside the band.
• A company going from £300,000 to £310,000 pays £2,500 more, all of it at 25%.

That 26.5% applies only to the extra slice. The company’s overall effective rate still sits between 19% and 25%, as the profit levels in the previous section show.

Once qualifying dividends come in, that figure shifts: in the dividends example further down, each extra £1 costs about 25.9p.

Associated companies cut your corporation tax thresholds

Control is the test here: a company is associated with yours if either one controls the other, or if one person or group controls both. HMRC’s guidance on associated companies says a company can be associated wherever it’s resident for tax.

Count the associated companies, add one for your own, and divide both limits by the total. A single associated company cuts the limits to £25,000 and £125,000.

These rules decide which companies count:

• A company counts if it was associated at any point in your accounting period, even for part of it.
• A company is ignored if, for the whole time it was associated in your period, it ran no trade or business.
• Some passive holding companies are treated as not carrying on a business, provided they meet every statutory condition.
• Rights held by your associates, including a spouse, civil partner or relative, are counted towards control only if the two companies have substantial commercial interdependence.

Here’s the effect in pounds (12-month period, no dividends received). A company with £68,000 of profit and no associated companies pays £14,270. Add one associated company and the same profit costs £16,145, which is £1,875 more.

Associated companies also divide the £1.5 million profit threshold that decides whether a company normally pays in instalments.

Payment deadlines are in the guide on how to pay corporation tax.

Short periods and dividends received can cost more

Short accounting periods

A period of under 12 months gets smaller limits, scaled to its length. HMRC’s manual notes that, strictly, the reduction should follow the number of days in the period.

Take a 184-day accounting period inside a 365-day financial year, with no associated companies. That brings the limits down to about £25,205 at the lower end and £126,027 at the top.

Profit of £31,000 now sits above the lower limit, so the bill comes to £6,324.59. Over a full 12-month period, the same profit would cost £5,890 at 19%.

Dividends your company receives

Augmented profits are your company’s taxable total profits plus the qualifying tax-free dividends it receives.

Dividends from your company’s own 51% subsidiaries, or from fellow 51% subsidiaries of its parent, are left out, along with some from consortium-owned companies.

The qualifying dividends aren’t taxed, but they can push augmented profits further up the band. Say your company has £90,000 of taxable profit and receives £20,000 of qualifying dividends: augmented profits become £110,000, and the bill rises from £20,100 to about £20,782.

These are dividends paid to your company, which is a separate matter from any dividend tax a shareholder may owe personally.

Not every company can use the lower rates

On top of the profit limits, the legislation sets two conditions for both the small profits rate and marginal relief. The company must be UK resident in the accounting period, and it mustn’t be a close investment-holding company.

GOV.UK’s marginal relief guidance lists non-UK resident companies among those that can’t claim the relief. HMRC’s manual keeps one route open: a UK branch of an overseas company can qualify where a double taxation agreement’s non-discrimination article applies.

A close investment-holding company is a close company that doesn’t exist wholly or mainly for permitted purposes throughout the accounting period, with a carve-out for some companies in liquidation.

The permitted purposes include these:

• Trading on a commercial basis is a permitted purpose.
• Investing in land that’s let, or meant to be let, on commercial terms is a permitted purpose, though letting to people connected with the company, or to certain of their family members, doesn’t count as commercial.
• Holding shares in, lending to or co-ordinating trading or letting companies controlled by it, or by its own controlling company, is a permitted purpose.

Outside that treaty route, a company that fails either condition can’t use the small profits rate or marginal relief, whatever its profits.

The ring fence corporation tax rate runs higher

Companies that extract oil, or hold oil rights, in the UK or on the UK continental shelf pay separate ring fence rates on those profits.

GOV.UK’s table sets these figures for every financial year since 1 April 2023:

• The small ring fence profits rate is 19%.
• The main ring fence profits rate is 30%.
• Marginal relief uses the same £50,000 and £250,000 limits as other profits.
• The ring fence fraction used in the relief is 11/400.

The ring fence relief band was far higher before April 2023, running from £300,000 to £1.5 million.

Check which corporation tax rates apply to you

Corporation tax rates start with the headline 19% and 25%, but the answer for your company depends on its own limits and profit figure.

Work out augmented profits for the accounting period first. Next, divide the limits for any associated companies and scale them down for a period shorter than 12 months.

At or below the lower limit, the small profits rate applies to the whole profit. Above the upper limit, the main rate applies in full, and in between, the 25% bill is cut by marginal relief, with each extra pound costing 26.5% where no dividends are received.

Non-UK resident companies (unless the treaty route applies) and close investment-holding companies sit outside those rules, and ring fence profits have their own rates.

The guide to filing a corporation tax return shows where these figures end up.

Key Takeaways

The short version:

• In the financial year starting 1 April 2026, a qualifying UK-resident company pays the 19% small profits rate up to £50,000 of profit and the 25% main rate once profits pass £250,000.
• Between those limits, tax at 25% is reduced by marginal relief, worked out with the 3/200 standard fraction.
• Where taxable and augmented profits match, each extra pound inside the band is taxed at 26.5%, while the overall effective rate stays between 19% and 25%.
• Associated companies and a period shorter than 12 months both reduce the limits: count the associated companies, add one, divide, then scale for a short period.
• Qualifying dividends a company receives count towards augmented profits, and close investment-holding companies can’t use the lower rates, nor can non-UK resident companies unless a treaty route applies.
• Ring fence oil and gas profits have their own rates of 19% and 30%, with an 11/400 fraction.