Corporation tax remains a crucial consideration for UK limited companies, with the 2026/27 tax year introducing distinct rates depending on your company’s taxable profits. Understanding the small profits rate, main rate, and how marginal relief works can save your business significant money and avoid costly errors when filing your tax return.
For 2026/27, the headline corporation tax main rate is 25%, but smaller companies with profits up to £50,000 benefit from a lower 19% rate. Profits between £50,000 and £250,000 are subject to a tapered rate via marginal relief. This tiered system ensures that companies transition smoothly between the rates rather than facing a sudden jump in tax.
| Tax Year 2026/27 | Taxable Profits (£) | Corporation Tax Rate | Notes |
|---|---|---|---|
| 2026/27 | Up to £50,000 | 19% | Small profits rate |
| 2026/27 | Between £50,001 and £250,000 | Marginal relief applies | Tapered rate between 19% and 25% |
| 2026/27 | Above £250,000 | 25% | Main corporation tax rate |
Overview of Corporation Tax Rates 2026/26
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Use Free Tax Calculator →From 1 April 2023, the UK corporation tax system moved to a ‘single main rate’ structure, but with a lower small profits rate retained for companies with profits up to £50,000 to support smaller businesses. The main rate of 25% applies to larger companies making profits over £250,000. To bridge this gap, marginal relief provides a sliding scale of tax rates on profits between £50,001 and £250,000.
This approach benefits small and medium-sized businesses, preventing a sudden jump from 19% to 25% corporation tax, and helps companies plan their tax liabilities more accurately. The thresholds are proportionally reduced for companies with associated businesses, ensuring fairness across groups.
Small Profits Rate vs Main Rate
The small profits rate of 19% applies to companies whose taxable profits do not exceed £50,000 for the 2026/26 tax year. This rate is unchanged from previous years and is designed to keep tax liabilities lower for genuinely small businesses.
Conversely, the main corporation tax rate of 25% applies to companies with profits exceeding £250,000. This higher rate reflects the government’s intention to tax larger, more profitable companies at a higher rate.
For companies with profits between these two limits, marginal relief provides a gradual increase in the effective corporation tax rate from 19% to 25%. The relief reduces the tax payable, effectively smoothing the tax rate between the two thresholds.
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Understanding Marginal Relief
Marginal relief reduces the corporation tax payable for companies with profits between £50,001 and £250,000, ensuring a smooth transition from the small profits rate to the main rate. Without this relief, a company making just over £50,000 in profits would face a sudden increase in their corporation tax to 25%, which would be a significant jump.
The relief amount is calculated using a specific formula set by HMRC, which takes into account the amount of profits and the marginal relief fraction. For the 2026/27 tax year, the marginal relief fraction is 3/200.
How to Calculate Marginal Relief
The formula for marginal relief is:
Marginal Relief = (Upper limit – Profits) × Marginal Relief Fraction
Where the upper limit is £250,000, and the marginal relief fraction is 3/200 (i.e., 0.015).
The corporation tax due is then:
Tax = (Profits × Main rate) – Marginal Relief
Example: If a company has £100,000 taxable profits:
- Calculate marginal relief: (£250,000 – £100,000) × 0.015 = £150,000 × 0.015 = £2,250
- Calculate tax at main rate: £100,000 × 25% = £25,000
- Subtract marginal relief: £25,000 – £2,250 = £22,750
The company would owe £22,750 in corporation tax.
Associated Companies and Threshold Adjustments
If your company is part of a group or has associated companies, the profit thresholds for the small profits rate and marginal relief are reduced to prevent multiple companies benefiting from the lower rates unfairly.
The £50,000 and £250,000 thresholds are divided by the number of associated companies plus one. For example, if your company has two associated companies, the thresholds for your business would be:
- Small profits rate threshold: £50,000 ÷ (2+1) = £16,666.67
- Upper marginal relief threshold: £250,000 ÷ (2+1) = £83,333.33
This means your business will move into the higher corporation tax bracket sooner if it is part of a group.
Filing Corporation Tax Returns & HMRC Guidance
All companies subject to corporation tax must file a company tax return (CT600) with HMRC, usually within 12 months of the end of the accounting period. The payment deadline for corporation tax is nine months and one day after the end of the accounting period.
It is essential to calculate your corporation tax liability accurately to avoid penalties or interest charges. HMRC provides detailed guidance on corporation tax rates, thresholds, and how to calculate marginal relief on their GOV.UK pages.
For more comprehensive information on corporation tax compliance and deadlines, see our Corporation Tax Guide.
Maximising Tax Efficiency for Small Businesses
Understanding these corporation tax rates and thresholds allows small business owners to plan their finances and tax payments effectively. Some practical tips to consider include:
- Monitor your company profits regularly to know when you approach the marginal relief band.
- Consider the timing of income and expenses to manage taxable profits within the lower band if possible.
- Review group structures and associated companies to understand the impact on thresholds.
- Seek professional advice if your company’s profit levels fluctuate near the thresholds.
For business owners weighing up whether to operate as a limited company or sole trader, our Sole Trader vs Limited Company guide provides useful insights.
- The small profits corporation tax rate for 2026/26 is 19% on profits up to £50,000.
- Profits between £50,001 and £250,000 benefit from marginal relief, which gradually increases the tax rate up to 25%.
- The main corporation tax rate of 25% applies to profits over £250,000.
- Thresholds are reduced if your company has associated companies, affecting the rates applicable.
- Accurate calculation of marginal relief is essential for correct tax payments, and HMRC guidance should be followed.
What is the corporation tax small profits rate for 2026/26?
For the tax year 2026/27, the small profits rate of corporation tax is 19%, which applies to companies with taxable profits of £50,000 or less.
How does marginal relief work between £50,000 and £250,000 profits?
Marginal relief provides a gradual increase in corporation tax from 19% to 25% for profits between £50,001 and £250,000, calculated using a formula involving the marginal relief fraction of 3/200.
Are the corporation tax thresholds affected by associated companies?
Yes, if your company has associated companies, the small profits and upper marginal relief thresholds are divided by the number of associated companies plus one, reducing the limits applicable to your business.
Official Sources
* GOV.UK: Set up a business · * HMRC: Income Tax rates · * HMRC: Corporation Tax · * HMRC: VAT registration