Small Company Corporation Tax Rates 2025/2026: Complete Guide

Since April 2023, the UK has operated a two-tier corporation tax system. Small companies with low profits pay less tax, while larger companies pay the full 25% rate. But working out which rate applies to you — and calculating marginal relief — isn't always straightforward.

This guide breaks down the corporation tax rates for 2025/2026 and shows you exactly how to work out what your company will pay.

Corporation Tax Rates: FY2025 (1 April 2025 – 31 March 2026)

The rates for FY2025 remain the same as FY2024:

Profit Level	Tax Rate
Profits up to £50,000	19% (small profits rate)
Profits over £250,000	25% (main rate)
Profits between £50,000 and £250,000	Marginal relief applies (effective rate between 19% and 25%)

These thresholds apply to augmented profits — which means your taxable trading profits plus any franked investment income (dividends from non-group companies).

What Changed in April 2023?

Before April 2023, there was a single flat rate of 19% for all companies regardless of profit level. From 1 April 2023:

The main rate increased to 25%
A small profits rate of 19% was reintroduced for the first time since 2015
Marginal relief was brought back to smooth the transition between the two rates

This means the rate you pay now depends entirely on your profit level and the number of associated companies you have.

Marginal Relief: How It Works

If your company's augmented profits fall between £50,000 and £250,000, you don't simply pay 25%. Instead, you calculate your tax using the marginal relief formula:

The Formula

Tax = Profits × 25% − Marginal Relief

Where:

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

The fraction 3/200 (which equals 1.5%) is the standard marginal relief fraction set by HMRC.

Worked Example

Company A has:

Taxable profits: £120,000
No franked investment income
No associated companies

Step 1: Tax at main rate = £120,000 × 25% = £30,000

Step 2: Marginal relief = (£250,000 − £120,000) × (£120,000 ÷ £120,000) × 3/200 = £130,000 × 1 × 0.015 = £1,950

Step 3: Tax payable = £30,000 − £1,950 = £28,050

Effective tax rate = £28,050 ÷ £120,000 = 23.375%

This is significantly less than the full 25% rate, saving the company £1,950.

Effective Tax Rates at Key Profit Levels

Augmented Profits	Effective Tax Rate	Tax Payable
£50,000	19.00%	£9,500
£75,000	20.50%	£15,375
£100,000	21.75%	£21,750
£150,000	23.50%	£35,250
£200,000	24.25%	£48,500
£250,000	25.00%	£62,500

Notice that the effective rate increases gradually from 19% to 25% as profits rise through the marginal band.

Associated Companies: Why They Matter

The £50,000 and £250,000 thresholds are divided equally by the number of associated companies you have, plus one (for your company itself).

What counts as an associated company?

A company is associated with yours if:

The same person controls both companies — this means you (or a connected person) hold more than 50% of the ordinary share capital, voting rights, or rights to distributable income
The other company is active (dormant companies are generally excluded, with some exceptions)
The association existed at any point during the accounting period

Example: Impact of Associated Companies

You control two active companies (Company A and Company B).

The thresholds are divided by 2:

Threshold	Standard	With 1 Associated Company
Lower limit	£50,000	£25,000
Upper limit	£250,000	£125,000

So if Company A makes £80,000 profit, it's now in the marginal relief band (between £25,000 and £125,000), whereas without the associated company it would have been paying a straight 25% rate only above £250,000.

This can significantly increase your tax rate. A company with £50,000 profits and no associates pays 19%. The same company with one associated company has a lower limit of £25,000 — so £50,000 profit is now in the marginal band and the effective rate jumps to about 23%.

Spouses and Connected Persons

HMRC's definition of "control" includes shares held by connected persons — spouses, civil partners, minor children, and business partners. If your spouse runs a separate limited company, it could count as an associated company, reducing your thresholds.

However, HMRC will disregard the association if there is no substantial commercial interdependence between the companies. This means the companies don't share:

Financial resources (loans, guarantees)
Economic resources (shared premises, equipment, customers)
Organisational resources (shared staff, management)

If the companies are genuinely independent, you can argue they shouldn't be treated as associated.

Short Accounting Periods

If your accounting period is less than 12 months (common in a company's first year), the thresholds are proportionally reduced.

Example: A 6-month accounting period means:

Lower limit: £50,000 × 6/12 = £25,000
Upper limit: £250,000 × 6/12 = £125,000

This catches out many new companies who assume they get the full £50,000 at 19%.

How to Check Which Rate Applies to You

Follow these steps:

Calculate your augmented profits — taxable profits + franked investment income (dividends from non-group companies)
Count associated companies — active companies under common control (see rules above)
Adjust thresholds — divide £50,000 and £250,000 by (number of associated companies + 1)
Adjust for short periods — if your accounting period is less than 12 months, pro-rate the thresholds
Apply the rate:
- Below lower limit → 19%
- Above upper limit → 25%
- Between the two → calculate marginal relief

Reporting on Your CT600

When filing your CT600:

Box 1 — Turnover
Box 21 — Total profits chargeable to corporation tax
Boxes 25-30 — Used for associated companies details and marginal relief claim
Box 86 — Final tax payable (after marginal relief deduction)

If you're claiming marginal relief, make sure you complete the relevant boxes — HMRC won't apply it automatically if you just enter your profit figure.

Calculate Your Tax and File with Taxpipe

Not sure what rate you'll pay? Taxpipe automatically calculates your corporation tax rate, applies marginal relief where applicable, and handles associated companies adjustments — all for just £59. File your CT600 directly to HMRC without the complexity.

Small Company Corporation Tax Rates 2025/2026: Complete Guide