Small Company Corporation Tax Rate 2025/26: Everything You Need to Know
Since April 2023, the UK has had two Corporation Tax rates. If your company's profits are under £50,000, you pay less. Here's exactly how it works.
Current Rates (FY2024 and FY2025)
| Profit Level | Rate | Effective Rate |
|---|---|---|
| Up to £50,000 | 19% (small profits rate) | 19% |
| £50,001 - £250,000 | Marginal relief applies | 19% - 25% |
| Over £250,000 | 25% (main rate) | 25% |
These rates have been the same since April 2023 and are unchanged for 2025/26.
Do I Qualify for the Small Profits Rate?
Your company qualifies for the 19% small profits rate if:
- Your augmented profits are £50,000 or less
- Adjusted for associated companies (see below)
Augmented profits = taxable profits + exempt distributions (dividends from non-group companies).
In practice, for most small owner-managed companies with no associated companies and no dividend income from investments, augmented profits = taxable profits.
Associated Companies: The Hidden Catch
The £50,000 and £250,000 thresholds are divided by (1 + number of associated companies).
| Associated Companies | Lower Limit | Upper Limit |
|---|---|---|
| 0 | £50,000 | £250,000 |
| 1 | £25,000 | £125,000 |
| 2 | £16,667 | £83,333 |
| 3 | £12,500 | £62,500 |
| 5 | £8,333 | £41,667 |
A company is "associated" if it's under common control — typically where the same person or group owns 51%+ of both companies.
Dormant companies don't count as associated companies.
Example: Two Companies
You own Company A (profits £40,000) and Company B (profits £30,000).
Without associated companies: both would pay 19%. With 1 associated company each: thresholds halve to £25,000/£125,000.
- Company A (£40,000): marginal rate band → pays ~20.5%
- Company B (£30,000): marginal rate band → pays ~19.75%
Short Accounting Periods
If your accounting period is shorter than 12 months, the thresholds are proportionally reduced.
Example: 6-month period, no associated companies:
- Lower limit: £50,000 × 6/12 = £25,000
- Upper limit: £250,000 × 6/12 = £125,000
Marginal Relief Calculation
If your profits fall between the lower and upper limits, marginal relief reduces your tax from 25% towards 19%.
The formula:
Marginal relief = 3/200 × (Upper limit - Augmented profits) × (Taxable profits / Augmented profits)
Example
Company profits: £100,000, no associated companies.
| Calculation | Amount |
|---|---|
| Tax at main rate (25%) | £25,000 |
| Upper limit | £250,000 |
| Marginal relief: 3/200 × (£250,000 - £100,000) | £2,250 |
| Tax payable | £22,750 |
| Effective rate | 22.75% |
Planning Tips
- Split profits between companies carefully — associated company rules may negate the benefit
- Time capital allowances — AIA claims can keep profits below £50,000
- Pension contributions — employer contributions reduce taxable profits
- Don't incorporate just for the rate — 19% CT + extraction costs (dividends/salary) can exceed sole trader rates for profits under ~£50,000
Not sure which rate applies? File with Taxpipe — we calculate your exact rate including marginal relief. £59.