Corporation Tax Rates 2025/26 and Marginal Relief Explained

The UK has a two-tier corporation tax system. Companies with small profits pay 19%, companies with large profits pay 25%, and companies in between benefit from marginal relief — a taper that gradually increases the effective rate rather than creating a sudden jump.

These rates have applied since 1 April 2023 and continue through the 2025/26 financial year (1 April 2025 to 31 March 2026).

The Three Rates at a Glance

Taxable profits	Rate
Up to £50,000	19% (small profits rate)
£50,001 to £250,000	19%–25% (marginal relief band)
Over £250,000	25% (main rate)

These thresholds apply per company. If your company has associated companies, both thresholds are divided — see below.

Non-UK resident companies: The small profits rate and marginal relief do not apply. Non-resident companies within the charge to UK Corporation Tax pay the 25% main rate on all profits.

Small Profits Rate: 19%

If your company's augmented profits are £50,000 or less, the entire profit is taxed at 19%.

Example — Company A, £40,000 profit, no associated companies:

Corporation Tax = £40,000 × 19% = £7,600

Main Rate: 25%

If your augmented profits exceed £250,000, the entire profit is taxed at 25%.

Example — Company C, £300,000 profit, no associated companies:

Corporation Tax = £300,000 × 25% = £75,000

What Are Augmented Profits?

HMRC does not use your taxable profits alone to decide which rate applies. It uses augmented profits — your taxable total profits (CT600 box 315) plus any dividends received from UK companies that are not part of your group and are otherwise exempt from Corporation Tax.

For most small owner-managed companies that do not hold shares in other UK companies, augmented profits and taxable profits are identical. The distinction matters only if your company receives dividends from investments in other UK companies.

Marginal Relief: How It Works

Marginal relief prevents a cliff-edge at £50,000. Without it, a company earning £50,001 would owe 25% on its entire profit — an immediate extra tax cost of around £3,000. Marginal relief applies a deduction that tapers from its maximum value at £50,000 down to zero at £250,000.

The statutory formula:

Marginal Relief = (3/200) × (Upper Limit − Augmented Profits) × (Taxable Profits ÷ Augmented Profits)

The fraction 3/200 is the marginal relief fraction set by HMRC.

When augmented profits equal taxable profits (the usual case), the formula simplifies to:

Marginal Relief = (3/200) × (£250,000 − Taxable Profits)

You do not need to calculate this yourself — it is worked out automatically on the CT600.

Marginal Relief Worked Examples

Example 1 — Profits of £100,000

No associated companies. Augmented profits = taxable profits.

Tax at 25%: £100,000 × 25% = £25,000
Marginal relief: (3/200) × (£250,000 − £100,000) = 0.015 × £150,000 = £2,250
Corporation Tax payable: £25,000 − £2,250 = £22,750
Effective rate: 22.75%

Example 2 — Profits of £150,000

No associated companies.

Tax at 25%: £150,000 × 25% = £37,500
Marginal relief: (3/200) × (£250,000 − £150,000) = 0.015 × £100,000 = £1,500
Corporation Tax payable: £37,500 − £1,500 = £36,000
Effective rate: 24%

Example 3 — Profits of £200,000

No associated companies.

Tax at 25%: £200,000 × 25% = £50,000
Marginal relief: (3/200) × (£250,000 − £200,000) = 0.015 × £50,000 = £750
Corporation Tax payable: £50,000 − £750 = £49,250
Effective rate: 24.625%

As these examples show, the effective rate rises smoothly from 19% at £50,000 to 25% at £250,000, with no sudden jump.

Associated Companies — Reduced Thresholds

Both thresholds must be divided by one plus the number of associated companies.

Two companies are associated if the same person (or connected persons acting together) controls both — typically meaning ownership of more than 50% of the shares or voting rights. Your company itself is not counted; only the others.

Formula: Adjusted thresholds = standard threshold ÷ (1 + number of associated companies)

Associated companies	Lower threshold	Upper threshold
0	£50,000	£250,000
1	£25,000	£125,000
2	£16,667	£83,333
3	£12,500	£62,500
4	£10,000	£50,000

Example — one associated company:

You own two companies: a trading company (Company X) and a property holding company (Company Y). Each is associated with the other, so each enters 1 in box 326.

For Company X with profits of £80,000:

Adjusted upper threshold: £250,000 ÷ 2 = £125,000
Adjusted lower threshold: £50,000 ÷ 2 = £25,000
Profits of £80,000 fall between £25,000 and £125,000 — marginal relief applies
Tax at 25%: £80,000 × 25% = £20,000
Marginal relief: (3/200) × (£125,000 − £80,000) = 0.015 × £45,000 = £675
Corporation Tax payable: £19,325 (effective rate 24.2%)

For a detailed guide on what counts as an associated company — including common scenarios for directors who own multiple companies — see Associated Companies — How They Affect Your Corporation Tax Rate.

Short Accounting Periods

If your accounting period is less than 12 months, both thresholds are prorated by the number of days in the period.

Example — 6-month accounting period (184 days):

Adjusted lower threshold: £50,000 × 184/365 = £25,205
Adjusted upper threshold: £250,000 × 184/365 = £126,027

This situation arises when a company incorporates mid-year or changes its accounting year end.

Accounting Periods Spanning Two Financial Years

A financial year runs from 1 April to 31 March and is named by the year in which it starts. FY 2025 runs 1 April 2025 to 31 March 2026.

If your accounting period spans two financial years — for example, a year running 1 January 2025 to 31 December 2025 — the profit is split between FY 2024 and FY 2025 in proportion to the days in each. The CT600 has two financial year rows (FY1 and FY2) to handle this. Since the Corporation Tax rates are the same in FY 2024 and FY 2025, the split does not change the total tax for most companies.

How Marginal Relief Appears on the CT600

The CT600 calculates marginal relief automatically from the figures you provide. The relevant boxes are:

Box 326 — Number of associated companies in this period. Enter 0 if you have none. Do not count your own company. If the number differs between the two financial years your period straddles, use boxes 327 and 328 instead.
Box 329 — Automatically ticked when your company qualifies for the small profits rate or marginal relief.
Boxes 330 and 380 — Financial year identifiers (FY1 and FY2). A financial year is identified by the calendar year in which it begins — for example, FY 2025 starts on 1 April 2025.
Boxes 335–425 — Profit allocated to each financial year and the applicable rate.
Box 430 — Total Corporation Tax before marginal relief (sum of all rate rows).
Box 435 — Marginal relief deduction, calculated automatically using the 3/200 formula.
Box 440 — Corporation Tax chargeable = box 430 minus box 435.

You enter your taxable profits and associated company count; the software works out the rest.

Payment and Filing Deadlines

Payment: Corporation Tax is due 9 months and 1 day after the end of the accounting period. For a 31 March 2026 year end, payment is due by 1 January 2027.

Filing: The CT600 return must be filed within 12 months of the accounting period end — for a 31 March 2026 year end, by 31 March 2027.

Late filing penalties — two regimes:

For returns with a filing date on or after 1 April 2026 (which covers most 2025/26 year ends):

£200 for a return filed after the deadline
A further £200 if still outstanding at 3 months
£1,000/£1,000 for a third consecutive late return

For returns with a filing date before 1 April 2026:

£100 initial penalty, plus £100 at 3 months

For returns more than 6 months late, a tax-geared penalty also applies: 10% of unpaid tax at 6 months, plus a further 10% at 12 months.

Late payment interest (from 9 January 2026): 7.75% per year on unpaid Corporation Tax.

Calculate Your Corporation Tax

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Related articles:

Related guides:

Associated Companies — How They Affect Your Corporation Tax Rate

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Corporation Tax Rates 2025/26 - Marginal Relief Calculator