UK Corporation Tax Rates: Complete History
Corporation tax has been a feature of the UK tax system since 1965. Over nearly six decades, rates have risen, fallen, been unified, split, and reformed. Understanding this history puts today's rates in context — and helps you appreciate why the current system works the way it does.
This guide charts every significant change to UK corporation tax rates from inception to the present day, with a focus on what matters for small company directors filing their CT600 in 2025/26.
Current Rates at a Glance (2025/26)
Before diving into history, here's where we are now:
| Profit level | Rate |
|---|---|
| Profits up to £50,000 | 19% (small profits rate) |
| Profits £50,001–£249,999 | 19%–25% (marginal relief applies) |
| Profits £250,000+ | 25% (main rate) |
These thresholds are divided by the number of associated companies plus one. So a company with one associated company has effective thresholds of £25,000 and £125,000.
The Complete History
1965–1973: The Beginning
Corporation tax was introduced on 1 April 1965 by the Finance Act 1965 under Harold Wilson's Labour government. Before this, company profits were taxed under income tax plus a separate profits tax.
| Year | Main rate |
|---|---|
| 1965–66 | 40% |
| 1966–67 | 40% |
| 1967–68 | 42.5% |
| 1968–69 | 45% |
| 1969–70 | 45% |
| 1970–71 | 40% |
| 1971–72 | 40% |
| 1972–73 | 40% |
Key facts:
- No separate small companies rate initially — all companies paid the same rate
- The "classical system" taxed profits at the company level, then dividends were taxed again in shareholders' hands
- Rates started at 40%, briefly rose to 45% in the late 1960s, then returned to 40%
1973–1983: High Rates and the Small Companies Rate
The Finance Act 1972 overhauled the system from April 1973, introducing the imputation system and a separate small companies rate. The main rate jumped to 52%.
| Year | Main rate | Small companies rate |
|---|---|---|
| 1973–74 | 52% | 42% |
| 1974–75 | 52% | 42% |
| 1975–76 | 52% | 42% |
| 1976–77 | 52% | 42% |
| 1977–78 | 52% | 42% |
| 1978–79 | 52% | 42% |
| 1979–80 | 52% | 40% |
| 1980–81 | 52% | 40% |
| 1981–82 | 52% | 40% |
| 1982–83 | 52% | 38% |
Key facts:
- 52% was the highest main rate in corporation tax history
- The small companies rate gave relief to businesses with profits below specified thresholds
- Marginal relief applied between the small companies and main rate thresholds — the same concept that exists today
1983–1997: The Lawson Reforms and Steady Decline
Nigel Lawson's 1984 Budget marked a turning point. The main rate was cut dramatically, accompanied by the removal of generous capital allowances — a trade-off of lower rates for a broader tax base.
| Year | Main rate | Small companies rate |
|---|---|---|
| 1983–84 | 50% | 38% |
| 1984–85 | 45% | 30% |
| 1985–86 | 40% | 30% |
| 1986–87 | 35% | 29% |
| 1987–88 | 35% | 27% |
| 1988–89 | 35% | 25% |
| 1989–90 | 35% | 25% |
| 1990–91 | 34% | 25% |
| 1991–92 | 33% | 25% |
| 1992–93 | 33% | 25% |
| 1993–94 | 33% | 25% |
| 1994–95 | 33% | 25% |
| 1995–96 | 33% | 25% |
| 1996–97 | 33% | 24% |
Key facts:
- The main rate fell from 52% to 33% in less than a decade — a huge reduction
- First-year capital allowances were abolished in exchange for lower rates
- The small companies rate settled at 25% — a figure that would echo through later reforms
- The UK became increasingly competitive internationally
1997–2010: New Labour and the Starting Rate Experiment
Gordon Brown introduced several changes, including a controversial 0% starting rate for small companies that was quickly exploited and withdrawn.
| Year | Main rate | Small companies rate | Starting rate |
|---|---|---|---|
| 1997–98 | 31% | 21% | — |
| 1998–99 | 31% | 21% | — |
| 1999–00 | 30% | 20% | 10% |
| 2000–01 | 30% | 20% | 10% |
| 2001–02 | 30% | 20% | 10% |
| 2002–03 | 30% | 19% | 0% |
| 2003–04 | 30% | 19% | 0% |
| 2004–05 | 30% | 19% | 0% (with minimum 19%) |
| 2005–06 | 30% | 19% | — (abolished) |
| 2006–07 | 30% | 19% | — |
| 2007–08 | 30% | 20% | — |
| 2008–09 | 28% | 21% | — |
| 2009–10 | 28% | 21% | — |
Key facts:
- The 0% starting rate (2002–2004) was intended to help very small companies. Instead, individuals incorporated solely to access the 0% rate, costing the Treasury significant revenue. It was effectively neutralised by 2004 and fully abolished by 2006.
- The small companies rate dropped to 19% — the rate that later became the unified rate under the Coalition government
- The main rate fell below 30% for the first time in 2008
2010–2023: The Race to the Bottom
The Coalition and Conservative governments embarked on an aggressive rate-cutting strategy, eventually unifying the main and small rates at a single 19% — the lowest in the G20.
| Year | Main rate | Small profits rate |
|---|---|---|
| 2010–11 | 28% | 21% |
| 2011–12 | 26% | 20% |
| 2012–13 | 24% | 20% |
| 2013–14 | 23% | 20% |
| 2014–15 | 21% | 20% |
| 2015–16 | 20% | 20% (unified) |
| 2016–17 | 20% | 20% |
| 2017–18 | 19% | 19% |
| 2018–19 | 19% | 19% |
| 2019–20 | 19% | 19% |
| 2020–21 | 19% | 19% |
| 2021–22 | 19% | 19% |
| 2022–23 | 19% | 19% |
Key facts:
- The main rate fell from 28% to 19% in just seven years
- From 2015, there was a single unified rate — no distinction between small and large companies
- At 19%, the UK had the lowest corporation tax rate in the G7 and one of the lowest in the G20
- A planned cut to 17% was announced but never implemented — COVID-19 changed the fiscal picture
2023–Present: The Return of the Two-Rate System
In the 2021 Budget, Rishi Sunak announced the main rate would rise to 25% from April 2023 — the first significant increase in decades. To protect small businesses, the 19% small profits rate was reintroduced.
| Year | Main rate | Small profits rate | Lower limit | Upper limit |
|---|---|---|---|---|
| 2023–24 | 25% | 19% | £50,000 | £250,000 |
| 2024–25 | 25% | 19% | £50,000 | £250,000 |
| 2025–26 | 25% | 19% | £50,000 | £250,000 |
Key facts:
- The 25% rate represents a 6 percentage point increase — the largest single rise in corporation tax history
- Marginal relief returns for companies with profits between £50,000 and £250,000
- The effective marginal rate in the relief band is approximately 26.5% — actually higher than the main rate (a quirk of how marginal relief works)
- Thresholds are shared between associated companies
Key Trends Over 60 Years
The long decline
The dominant trend is unmistakable: rates have fallen dramatically. From a peak of 52% in the 1970s to 19% in 2017–2023, UK corporation tax rates fell by more than 60%.
The pendulum swings back
The 2023 increase to 25% represents a partial reversal. Post-COVID fiscal pressures made the ultra-low rate unsustainable. But even at 25%, the current rate is less than half the 1970s peak.
Small companies have always been treated differently
With few exceptions (the unified rate period of 2015–2023), the UK has maintained a lower rate for small companies. The current two-rate system with marginal relief is actually a return to the historical norm, not an innovation.
Rate cuts were traded for base broadening
The dramatic rate cuts of the 1980s came with the removal of generous capital allowances and other reliefs. Lower rates on a wider base was the deliberate policy. Understanding this trade-off matters — a low headline rate doesn't always mean a low effective rate.
How This Affects Your CT600 Today
Understanding the rate history helps you make sense of the current system:
If your profits are under £50,000
You pay the 19% small profits rate — the same rate that applied to all companies from 2017 to 2023. For most small limited companies, the 2023 rate rise changed nothing.
If your profits are between £50,000 and £250,000
You're in the marginal relief band. Your effective rate is between 19% and 25%, calculated using the marginal relief formula. The effective marginal rate of ~26.5% on profits in this band means you pay slightly more tax on each additional pound earned here than companies above £250,000.
If your profits exceed £250,000
You pay the full 25% main rate. This is where the 2023 increase hits hardest — a jump from 19% to 25% on all profits.
What's Next? Future Rate Predictions
No one can predict tax policy with certainty, but several factors shape the outlook:
- Fiscal pressure: The UK's debt-to-GDP ratio remains elevated post-COVID, making further rate cuts unlikely in the near term
- International competition: The OECD's Pillar Two framework introduces a global minimum effective tax rate of 15% for large multinationals, reducing the incentive for aggressive rate competition
- Political dynamics: Both major parties have signalled they want stable corporation tax rates — constant changes create uncertainty that businesses dislike
- The 25% rate seems settled for the medium term. No major party has proposed changing it
Filing Your CT600 with the Current Rates
Regardless of which rates apply to your company, filing software calculates everything automatically:
- Determine your taxable profits — after allowable expenses and reliefs
- Apply the correct rate — 19%, 25%, or the marginal relief calculation
- Account for associated companies — which may reduce your thresholds
- Submit to HMRC — via approved software
TaxPipe handles the rate calculations, marginal relief, and associated company adjustments automatically. You enter your figures — we work out the tax.
Frequently Asked Questions
What's the current UK corporation tax rate?
For financial year 2025/26: 19% on profits up to £50,000, 25% on profits over £250,000, with marginal relief between those thresholds.
When was corporation tax introduced in the UK?
1 April 1965, under the Finance Act 1965. Before that, companies paid income tax and profits tax separately.
What was the highest UK corporation tax rate ever?
52%, which applied from 1973 to 1983. The small companies rate during that period ranged from 38% to 42%.
Why did the rate go up to 25% in 2023?
To help repair public finances after COVID-19. The government estimated the increase would raise approximately £18 billion per year by 2025/26.
Will corporation tax go down again?
There are no current proposals to reduce the rate. Both major parties have indicated they want rate stability. The 25% main rate is expected to continue for the foreseeable future.
Does the rate change affect how I file my CT600?
No — the CT600 process is the same regardless of rate. Your filing software calculates the correct tax based on your profits and the applicable rate. The key is ensuring you correctly report your taxable profits.
The Bottom Line
UK corporation tax rates have been on a remarkable journey — from 40% at inception, up to 52% in the 1970s, down to 19% by 2017, and back up to 25% in 2023. The current two-rate system protects small companies while raising revenue from larger ones.
For most small limited company directors, the 19% small profits rate means the 2023 increase hasn't changed your tax bill. But whether you're at 19% or 25%, filing accurately and claiming all available reliefs is what matters most.
Need to file your CT600? Get started with TaxPipe — accurate tax calculations, automatic marginal relief, and HMRC submission in one simple process.