Corporation Tax Rates 2025/26: Small Company Guide (19% vs 25%)
Since April 2023, Corporation Tax has had two rates. Most small companies pay somewhere between 19% and 25%. Here's how it works.
The Two Rates
| Rate | Profit Level | Rate |
|---|---|---|
| Small profits rate | Up to £50,000 | 19% |
| Main rate | Over £250,000 | 25% |
| Marginal rate | £50,001–£250,000 | 26.5% effective |
If your profits are between £50,000 and £250,000, marginal relief applies. This creates an effective rate of 26.5% on the profits in that band — but your overall rate is still between 19% and 25%.
How Marginal Relief Works
Marginal relief uses a formula:
Relief = 3/200 × (Upper limit - Profits) × Profits / Profits
In simpler terms: you pay the 25% main rate, then get a relief that brings the effective rate down towards 19% as your profits approach £50,000.
Worked Examples
| Profit | CT Without Relief | Marginal Relief | CT Payable | Effective Rate |
|---|---|---|---|---|
| £30,000 | £7,500 (25%) | — | £5,700 (19%) | 19.0% |
| £50,000 | £12,500 (25%) | — | £9,500 (19%) | 19.0% |
| £100,000 | £25,000 (25%) | £2,250 | £22,750 | 22.75% |
| £150,000 | £37,500 (25%) | £1,500 | £36,000 | 24.0% |
| £200,000 | £50,000 (25%) | £750 | £49,250 | 24.625% |
| £250,000 | £62,500 (25%) | £0 | £62,500 | 25.0% |
Associated Companies
The £50,000 and £250,000 thresholds are divided by the number of associated companies. A company is associated if it's under common control.
| Associated Companies | Lower Limit | Upper Limit |
|---|---|---|
| None (1 company) | £50,000 | £250,000 |
| 1 associated | £25,000 | £125,000 |
| 2 associated | £16,667 | £83,333 |
| 3 associated | £12,500 | £62,500 |
Example: If you have 2 companies, the small profits rate applies up to £25,000 per company (£50,000 ÷ 2).
What Counts as Associated?
- Companies under common control (same person/group holds majority voting rights)
- Dormant companies count — even if they have no income
- Companies controlled by close relatives (spouse, parent, child) may count
Short Accounting Periods
If your accounting period is shorter than 12 months, the thresholds are proportionally reduced:
6-month period: £50,000 × 6/12 = £25,000 lower limit, £125,000 upper limit.
Financial Years
Corporation Tax rates are set per financial year (1 April to 31 March):
| Financial Year | Dates | Rates |
|---|---|---|
| FY2024 | 1 Apr 2024 – 31 Mar 2025 | 19%/25% |
| FY2025 | 1 Apr 2025 – 31 Mar 2026 | 19%/25% |
| FY2026 | 1 Apr 2026 – 31 Mar 2027 | 19%/25% (expected) |
If your accounting period spans two financial years, profits are apportioned by days in each year.
Tax Planning Tips
- Keep profits under £50,000 — salary/pension/dividends to stay in the 19% band
- Time expenses — bring forward purchases to reduce this year's profit
- Capital allowances — claim AIA on equipment to reduce taxable profit
- Pension contributions — employer contributions are fully deductible
- R&D relief — if you're innovating, enhanced deductions available
Taxpipe Calculates This Automatically
Taxpipe handles all of this — marginal relief, associated companies, financial year apportionment, short periods. Enter your figures and we calculate the exact tax.
File your CT600 with Taxpipe — £59, marginal relief calculated automatically.