Corporation Tax is charged on company profits for accounting periods, not tax years. The rates that apply depend on the financial year (FY) in which the profits fall. For Financial Year 2026 — covering 1 April 2026 to 31 March 2027 — the rates are unchanged from FY2025: a 19% small profits rate and a 25% main rate, with marginal relief for profits between the two thresholds.
Corporation Tax rates FY2026 (April 2026 to March 2027)
| Taxable profits | CT rate | Effective rate |
|---|---|---|
| Up to £50,000 | 19% (small profits rate) | 19% |
| £50,001 to £250,000 | 25% with marginal relief | 19% to 25% (tapered) |
| Over £250,000 | 25% (main rate) | 25% |
These thresholds are per company per year. They apply to the taxable profits of the company for the accounting period, not the company's turnover.
How marginal relief is calculated
Marginal relief is a deduction from the Corporation Tax calculated at the 25% main rate. It ensures that profits in the band between £50,000 and £250,000 are not subject to a sudden jump from 19% to 25% — instead, the effective rate tapers gradually.
The formula is:
For companies with no associated companies and no non-trading income, this simplifies to: (£250,000 − taxable profits) × 3/200
The effective marginal rate on profits in the £50,000 to £250,000 band is 26.5% — higher than either the small profits rate (19%) or the main rate (25%). This is an important counterintuitive point: adding an extra £1 of profit within this band costs more CT than adding it above £250,000.
Worked examples
Example 1: Profits of £40,000 (small profits rate)
CT = £40,000 × 19% = £7,600
Effective rate: 19%
Example 2: Profits of £100,000 (marginal relief)
- CT at main rate: £100,000 × 25% = £25,000
- Marginal relief: (£250,000 − £100,000) × 3/200 = £150,000 × 0.015 = £2,250
- CT payable: £25,000 − £2,250 = £22,750
- Effective rate: 22.75%
Example 3: Profits of £180,000 (marginal relief)
- CT at main rate: £180,000 × 25% = £45,000
- Marginal relief: (£250,000 − £180,000) × 3/200 = £70,000 × 0.015 = £1,050
- CT payable: £45,000 − £1,050 = £43,950
- Effective rate: 24.42%
Example 4: Profits of £300,000 (main rate)
CT = £300,000 × 25% = £75,000
No marginal relief applies above £250,000.
Associated companies and threshold division
The £50,000 and £250,000 thresholds are divided equally between associated companies. Two companies under common control have thresholds of £25,000 and £125,000 respectively. Three associated companies: £16,667 and £83,333 each.
Companies are associated if one controls the other, or if both are controlled by the same person or persons. Control generally means holding the majority of shares, voting rights, or economic rights.
The association test is applied at any point in the accounting period, not just at year-end. If companies become or cease to be associated mid-year, the thresholds may need to be time-apportioned.
Ring fence profits (oil and gas)
Companies with ring fence profits — income from oil and gas extraction and related activities — pay CT at different rates. Ring fence profits are taxed at 30%, with a supplementary charge of 10% (total 40%). These rates have applied since 1983 and are not affected by the main rate changes that took effect in 2023.
Is the 19% small profits rate automatic?
No. You must claim the small profits rate on your CT600 return. HMRC does not automatically apply it. If you file your CT600 and do not claim the small profits rate where applicable, you may be assessed at the main rate unnecessarily. Make sure your accountant or tax software correctly identifies the applicable rate and applies marginal relief where relevant.
Are Corporation Tax rates changing?
The government has confirmed it will cap the main Corporation Tax rate at 25% for the duration of the current parliament. No changes to the small profits rate or marginal relief band have been announced. The current rate structure (introduced April 2023) is the most stable it has been in several years, allowing businesses to plan with more certainty than during the period of frequent announcements and reversals in 2022.
However, other aspects of Corporation Tax are changing — particularly R&D relief (following the merger of the old SME and RDEC schemes in April 2024) and potential reforms to the intangible assets regime. Businesses should monitor HMRC's announcements for changes that may affect their specific situation.
Key takeaways
- Corporation Tax rates for FY2026 (April 2026 to March 2027): 19% on profits up to £50,000, 25% on profits over £250,000, with marginal relief between £50,000 and £250,000.
- The marginal relief formula is: (£250,000 minus taxable profits) multiplied by 3/200. This gives an effective marginal rate of 26.5% within the band.
- Thresholds are divided between associated companies — owning two associated companies halves each threshold to £25,000 and £125,000.
- The small profits rate must be claimed on your CT600 — it is not applied automatically by HMRC.
- The 25% main rate is confirmed for the duration of this parliament. No rate changes are currently planned.
Frequently asked questions
What is the Corporation Tax rate for a company with £75,000 profits?
A single company (with no associates) with taxable profits of £75,000 is in the marginal relief band. Tax at 25% is £18,750. Marginal relief is (£250,000 minus £75,000) multiplied by 3/200 = £175,000 × 0.015 = £2,625. CT payable is £18,750 minus £2,625 = £16,125. The effective rate is 21.5%.
Do the CT rate thresholds change if my accounting period is less than 12 months?
Yes. The £50,000 and £250,000 thresholds are proportionally reduced for accounting periods shorter than 12 months. For a 6-month period, the thresholds are halved to £25,000 and £125,000. This commonly affects new companies (whose first period may be shorter than 12 months) and companies that change their year-end.
Can pension contributions reduce a company's Corporation Tax bill?
Yes, employer pension contributions are a deductible business expense for Corporation Tax purposes, provided they are made wholly and exclusively for the purposes of the trade and are not excessive relative to the employee's role. Contributions must be paid to a registered pension scheme. Company pension contributions do not attract employer NI, which makes them a tax-efficient way of rewarding directors and key employees.
Does a company pay Corporation Tax on dividends received?
Generally no. UK companies are exempt from Corporation Tax on most dividends received from other companies under the "exempt distributions" rules. Exceptions apply to dividends from certain small companies or where the recipient has a substantial shareholding in companies in certain jurisdictions. This exemption prevents double taxation on profits that have already been subject to CT in the paying company.
When is Corporation Tax due for a company with a 31 March year-end?
For a company with a 31 March 2026 year-end (a small or medium company), Corporation Tax is due 9 months and 1 day after the year-end: 1 January 2027. The CT600 return must be filed within 12 months of the year-end: by 31 March 2027. Note the payment deadline is earlier than the filing deadline — you need to estimate your CT liability when making the January payment.