Corporation Tax Rates and Marginal Relief 2026/27 Explained

The two Corporation Tax rates for 2026/27

UK Corporation Tax has operated on a two-rate structure since April 2023, and it remains in place for 2026/27:

Always confirm the current rates and thresholds on gov.uk before finalising a Corporation Tax computation — rates and limits are set at fiscal events and can change between tax years.

What marginal relief is and who it affects

Without marginal relief, a company earning £50,001 in profit would suddenly face a much higher effective rate than a company earning £50,000 — a steep cliff-edge that would distort behaviour around the threshold. Marginal relief smooths this out: it reduces the Corporation Tax bill for companies with profits between the £50,000 lower limit and the £250,000 upper limit, so the effective rate rises gradually from 19% to 25% as profits increase through that band, rather than jumping straight to 25%.

This means the vast majority of small UK limited companies — anything trading comfortably under £50,000 profit — simply pay 19%, and the marginal relief mechanics only become relevant once profits move past that point.

How marginal relief is calculated

The standard marginal relief formula is:

Marginal Relief = Standard Fraction × (Upper Limit − Taxable Profit)

The standard fraction has been 3/200 since the current regime began in April 2023. Corporation Tax is first charged at the main rate (25%) on the whole profit, and then marginal relief is deducted to arrive at the amount actually due. In practice, most accounting software and HMRC's own calculator handle this automatically — you do not need to do the arithmetic by hand — but understanding the shape of it helps when reviewing management accounts or planning around the threshold.

A worked example

A company with £100,000 of taxable profit and no associated companies:

1. Corporation Tax at the main rate: £100,000 × 25% = £25,000
2. Marginal relief: 3/200 × (£250,000 − £100,000) = 3/200 × £150,000 = £2,250
3. Corporation Tax due: £25,000 − £2,250 = £22,750

That works out at an effective rate of 22.75% — between the 19% small profits rate and the 25% main rate, as expected for a company roughly in the middle of the marginal relief band. A company right at the bottom of the band (just over £50,000 profit) will have an effective rate very close to 19%; a company right at the top (close to £250,000) will have an effective rate very close to 25%.

Associated companies reduce your thresholds

The £50,000 and £250,000 limits are not fixed for every company — they are divided by the number of "associated companies" a business has, broadly meaning companies under common control (for example, group companies, or companies owned by the same person or close family). If a director owns two active trading companies, each threshold is generally halved to £25,000 and £125,000 for each company.

This catches business owners who have set up separate companies for different activities without realising the thresholds shrink accordingly — it is worth checking your specific group structure with an accountant rather than assuming the full £50,000/£250,000 limits apply.

When to pay and how to check

Corporation Tax is normally due 9 months and 1 day after the end of your accounting period, ahead of the CT600 filing deadline itself (12 months after the period end). Larger companies with profits above certain levels pay by instalments instead, but this does not apply to most small companies caught by the marginal relief band. See our separate guide to Corporation Tax payment deadlines for exactly when payment and filing fall due, and what happens if either is missed.

Because the calculation depends on exact profit figures, associated company status, and the length of the accounting period (short or long periods are apportioned), it is worth having your accountant confirm the figure rather than estimating from the formula alone — particularly in the first year of trading or after any change in company structure.

Why this matters for your bookkeeping

Knowing roughly where your company sits relative to £50,000 and £250,000 profit is useful long before year end — it affects decisions like the timing of capital purchases (see our guide to the Annual Investment Allowance), pension contributions, and dividend timing. It is also worth reviewing your salary versus dividend split alongside your Corporation Tax position, since the two decisions interact directly — the salary you pay reduces the profit Corporation Tax is charged on. Up-to-date monthly management accounts give you and your accountant visibility of where you are likely to land well before the year closes, rather than finding out after the fact.

Note: this article explains how Corporation Tax and marginal relief work generally. QaisYasir Accounting Services' current service scope is bookkeeping, VAT/MTD, and management accounts — for your Corporation Tax computation and CT600 filing, work with a qualified accountant, and use the figures here as background rather than a substitute for that advice.