Corporation Tax rates and marginal relief, explained

Figures are correct at the date of review. Always check GOV.UK for the latest.

The three bands

Since April 2023, Corporation Tax works in three parts, and the same applies for 2026:

• Profits up to £50,000: taxed at the small profits rate of 19%.
• Profits over £250,000: taxed at the main rate of 25%.
• Profits between £50,000 and £250,000: taxed at 25% with marginal relief reducing the bill.

How much Corporation Tax will I pay?

Here is the Corporation Tax at a range of profits, for a single company with a 12-month accounting period and no associated companies:

The effective rate climbs gently from 19% toward 25% as marginal relief is withdrawn across the band, while each extra pound inside £50,000 to £250,000 is taxed at 26.5%.

How marginal relief actually works

Marginal relief smooths the step between 19% and 25% so there’s no sudden cliff. Take a company with £100,000 of profit. The maths works out at £22,750 of Corporation Tax, an effective rate of about 22.75%, sitting neatly between the two headline rates. The reason people quote “26.5%” is that this is the rate on each extra pound earned inside the band, as the relief is withdrawn. So the average rate climbs gently from 19% towards 25% as profits rise, while the marginal rate on the next slice is 26.5%. Useful to know if you’re deciding whether to push for a bit more profit or bring forward an expense.

The marginal relief formula, shown

For a company whose profit falls in the marginal band, the Corporation Tax works out as:

Corporation Tax = (Profit × 25%) - ((£250,000 - Profit) × 3/200)

Take the £100,000 example above. £100,000 × 25% is £25,000. Then (£250,000 - £100,000) is £150,000, and £150,000 × 3/200 is £2,250. So £25,000 - £2,250 is £22,750, the figure quoted earlier. (This is the simple case, where your augmented profits are the same as your taxable profits.)

Or use our Corporation Tax calculator to get your figure, with associated companies and short periods handled for you.

The associated companies trap

This one catches directors with more than one company. The £50,000 and £250,000 limits are divided by the number of associated companies (companies under common control) plus one. So with one associated company, they halve to £25,000 and £125,000; with three, they quarter. That means each company reaches the 25% territory on much lower profits. If you run a group or several companies, this needs planning, and we factor it in.

Short accounting periods

If your accounting period is shorter than 12 months (common in a company’s first year), the thresholds are reduced proportionately. A six-month period, for example, uses half the limits. We adjust for this automatically when we calculate your tax.

What the rate used to be

Before 1 April 2023, Corporation Tax was a single flat rate of 19% on all profits, whatever their size. The three-band system (19%, marginal relief, then 25%) began on 1 April 2023 and still applies for 2026.

Not sure which rate applies to you? See the full Corporation Tax guide, check the Corporation Tax deadlines for paying and filing, or take our 2-minute quiz for a tailored answer.