Since April 2023, having associated companies can significantly increase your Corporation Tax bill. Here's what counts, what doesn't, and how it affects your CT600.

What changed in April 2023?

Before April 2023, there was a single Corporation Tax rate of 19% for all companies. Associated companies didn't matter for tax calculation purposes.

From April 2023, the UK has a multi-rate system:

19% on profits up to £50,000 (small profits rate)
25% on profits over £250,000 (main rate)
Marginal relief for profits between £50,000 and £250,000

The crucial change: the £50,000 and £250,000 thresholds are divided by the number of associated companies. More associated companies = lower thresholds = more tax.

What is an associated company?

A company is associated with yours if one controls the other, or both are controlled by the same person(s) or group of persons.

Control means

A person controls a company if they hold:

More than 50% of the ordinary share capital, or
More than 50% of the voting power, or
Rights to more than 50% of distributable income, or
Rights to more than 50% of assets on winding up

Common examples

You're the sole director/shareholder of two companies: Both are associated. You control both.

You and your spouse each have a company: If either of you controls both companies (through combined shareholdings or voting rights), they're associated. If each person genuinely controls only their own company with no cross-involvement, they may not be associated.

Parent and subsidiary companies: Always associated — the parent controls the subsidiary.

Two companies with the same majority shareholder: Associated, even if the companies operate in completely different industries.

What is NOT an associated company?

Dormant companies — a company that has not carried on a trade or business at any time during the accounting period is excluded
Companies you hold as passive investments — where you have no active involvement
Companies controlled by different, unconnected people — even if they share a minor shareholder
Companies that have been struck off or dissolved

The dormant company exclusion is the most commonly missed. If you have a dormant holding company and an active trading company, the dormant one doesn't count as associated. This can save you thousands.

How associated companies affect your tax

Example 1: One company, no associates

Profit: £100,000
Small profits limit: £50,000
Main rate limit: £250,000
Marginal relief applies
Tax: £22,750 (effective rate ~22.75%)

Example 2: Same profit, one associated company

Profit: £100,000
Small profits limit: £50,000 ÷ 2 = £25,000
Main rate limit: £250,000 ÷ 2 = £125,000
Marginal relief still applies, but thresholds are halved
Tax: £23,750 (effective rate ~23.75%)
Extra tax: £1,000 just from having an associated company

Example 3: Same profit, four associated companies

Profit: £100,000
Small profits limit: £50,000 ÷ 5 = £10,000
Main rate limit: £250,000 ÷ 5 = £50,000
Profit exceeds the upper limit — main rate applies in full
Tax: £25,000 (flat 25%)
Extra tax: £2,250 compared to having no associates

How to report associated companies on your CT600

Box 1 — Number of associated companies

Enter the number of companies associated with yours during the accounting period. Do not include your own company in the count.

If you have zero associated companies, enter 0.

What if associates changed during the period?

If a company was only associated for part of your accounting period (e.g., you incorporated a new company halfway through), it still counts for the full period for the purpose of the threshold calculation.

What if the associated company has a different year-end?

Doesn't matter. If the company was associated at any time during your accounting period, it counts.

Strategies to reduce the impact

1. Make dormant companies actually dormant

If you have an old company that's not trading, make sure it's genuinely dormant — no bank transactions, no invoicing, no contracts. A truly dormant company doesn't count as associated.

2. Strike off unused companies

The simplest solution. If you have companies you're not using, apply for voluntary strike-off (DS01 form, £33). Fewer associated companies = higher thresholds = less tax.

3. Consider whether separate companies are necessary

If you're running multiple businesses through separate companies for no strong reason, consolidating into one company eliminates the associated company problem entirely.

4. Check the dormant company exemption carefully

HMRC's definition of dormant for associated company purposes is specific: the company must not have carried on any trade or business during the accounting period. Having a small amount of bank interest doesn't necessarily make it active, but having any trading activity does.

Common mistakes

1. Forgetting about old companies

Directors often forget about companies they set up years ago and never used. If those companies aren't formally dormant or struck off, they still count as associated.

2. Not counting spouse's companies

If you and your spouse jointly control companies (even informally), they may be associated. Get proper advice on whether the "control" test is met.

3. Including dormant companies

The opposite mistake — including genuinely dormant companies in the count, resulting in unnecessarily high tax.

4. Ignoring associated companies entirely

Some directors don't enter associated companies on the CT600 at all. If HMRC discovers you have associated companies (they cross-reference Companies House data), they'll amend your return and charge the additional tax plus interest.

Filing with Taxpipe

Taxpipe asks you how many associated companies your company has and automatically adjusts the tax thresholds. We calculate marginal relief based on the correct limits for your situation.

You just need to know the number — we handle the maths.

File your CT600 for £59 →

Associated Companies — How They Affect Your Corporation Tax Rate