Corporation Tax Rates and Thresholds UK 2025/26: Complete Guide
UK Corporation Tax rates for 2025/26 explained. The 25% main rate, 19% small profits rate, marginal relief, associated companies, and how to calculate your bill.
Quick Answer
UK Corporation Tax is 25% on profits over £250,000 and 19% on profits under £50,000. Profits between £50,000 and £250,000 are taxed at an effective marginal rate of 26.5% due to marginal relief. These thresholds are divided by the number of associated companies.
UK Corporation Tax for the financial year 2025 (1 April 2025 to 31 March 2026) operates on a two-rate system. Companies with taxable profits of £50,000 or less pay 19%. Companies with taxable profits above £250,000 pay 25%. Profits between those two thresholds qualify for marginal relief, which produces an effective rate between 19% and 25%. This guide covers every aspect of the current Corporation Tax regime: the rate bands, the marginal relief formula, associated company rules, augmented profits, short accounting periods, payment deadlines, filing obligations, penalties, loss relief, and the historical context that brought us to these rates.
Last updated: March 2026
What Are the Current UK Corporation Tax Rates?
The Corporation Tax rates for the financial year 2025 (which covers accounting periods falling between 1 April 2025 and 31 March 2026) are:
| Rate | Taxable Profits | Rate Applied |
|---|---|---|
| Small Profits Rate | £0 to £50,000 | 19% |
| Marginal Relief Band | £50,001 to £250,000 | Effective 26.5% on the marginal band |
| Main Rate | Over £250,000 | 25% |
These rates have been in effect since 1 April 2023. They apply to all UK-resident companies and to non-UK companies trading in the UK through a permanent establishment.
The small profits rate of 19% is not a separate regime. Every company is initially charged at the main rate of 25%, and those with profits within the marginal relief band or below £50,000 claim marginal relief to reduce their effective rate. In practice, HMRC and accounting software handle this automatically, but understanding the mechanics matters when you have associated companies or short accounting periods.
Key thresholds at a glance
| Threshold | Amount | Purpose |
|---|---|---|
| Lower limit | £50,000 | Below this, the effective rate is 19% |
| Upper limit | £250,000 | Above this, the full 25% rate applies |
| Marginal relief fraction | 3/200 (0.015) | Used in the relief calculation |
These thresholds are for a standalone company with a 12-month accounting period. If you have associated companies or a short accounting period, the thresholds are reduced proportionally.
How Does the Small Profits Rate Work?
If your company's augmented profits (taxable profits plus exempt distributions received from non-associated companies) are £50,000 or less for a 12-month accounting period, your Corporation Tax rate is effectively 19%.
Technically, the calculation works like this: your company is charged at the main rate of 25%, then marginal relief reduces the bill to produce an effective rate of 19%. The end result is the same as if 19% had been applied directly.
Example 1: Small profits company
A sole-director consultancy has taxable profits of £40,000 for the year ended 31 March 2026, with no associated companies and no exempt distributions.
| Item | Amount |
|---|---|
| Taxable profits | £40,000 |
| Corporation Tax at 25% | £10,000 |
| Less: marginal relief | (£2,400) |
| Corporation Tax payable | £7,600 |
| Effective rate | 19.0% |
The marginal relief calculation: 3/200 x (£250,000 - £40,000) x (£40,000 / £40,000) = £3,150. However, the relief is capped so the effective rate never drops below 19%. The actual relief applied is £2,400 (the difference between £10,000 at 25% and £7,600 at 19%).
For profits at or below £50,000, you do not need to perform the marginal relief calculation manually. The effective rate is simply 19%.
How Does the Main Rate Apply?
Companies with augmented profits exceeding £250,000 pay Corporation Tax at the full main rate of 25%. No marginal relief is available.
Example 2: Main rate company
A digital agency has taxable profits of £400,000 for the year ended 31 March 2026, with no associated companies.
| Item | Amount |
|---|---|
| Taxable profits | £400,000 |
| Corporation Tax at 25% | £100,000 |
| Marginal relief | £0 |
| Corporation Tax payable | £100,000 |
| Effective rate | 25.0% |
No further calculation is needed. The company is above the upper limit, so the main rate applies in full.
How Is Marginal Relief Calculated?
Marginal relief is the mechanism that transitions companies from the 19% small profits rate to the 25% main rate. It applies when augmented profits fall between the lower limit (£50,000) and the upper limit (£250,000).
The HMRC marginal relief formula
The official formula is:
Marginal Relief = 3/200 x (U - A) x (N/A)
Where:
- 3/200 = the marginal relief fraction (0.015 or 1.5%)
- U = the upper limit (£250,000, adjusted for associated companies and short periods)
- A = augmented profits (taxable profits + exempt distributions from non-associated companies)
- N = taxable profits (the amount actually subject to Corporation Tax)
In most cases for owner-managed companies, N equals A because there are no exempt distributions. When N = A, the fraction N/A simplifies to 1, and the formula becomes:
Marginal Relief = 3/200 x (U - A)
The effective marginal rate of 26.5%
Within the marginal band, each additional pound of profit is taxed at an effective rate of 26.5%. This is higher than the main rate of 25% because marginal relief is being withdrawn. Here is the maths:
- The main rate on an extra £1 of profit = 25p
- The withdrawal of marginal relief on that £1 = 1.5p (3/200)
- Total tax on that extra £1 = 25p + 1.5p = 26.5p
- Effective marginal rate = 26.5%
This means there is a tax penalty for profits falling within the band. A company earning £60,000 pays a higher marginal rate on the profits between £50,001 and £60,000 than a company earning £300,000 pays on any of its profits.
Worked example 3: Marginal relief in the band
A web development company has taxable profits of £120,000 for the year ended 31 March 2026. No associated companies. No exempt distributions.
Step 1: Calculate Corporation Tax at the main rate
£120,000 x 25% = £30,000
Step 2: Calculate marginal relief
Marginal Relief = 3/200 x (£250,000 - £120,000) x (£120,000 / £120,000)
= 3/200 x £130,000 x 1
= 0.015 x £130,000
= £1,950
Step 3: Calculate Corporation Tax payable
£30,000 - £1,950 = £28,050
Step 4: Effective rate
£28,050 / £120,000 = 23.375%
Worked example 4: Near the top of the band
A property management company has taxable profits of £220,000. No associated companies.
| Step | Calculation | Amount |
|---|---|---|
| CT at 25% | £220,000 x 25% | £55,000 |
| Marginal relief | 3/200 x (£250,000 - £220,000) | £450 |
| CT payable | £55,000 - £450 | £54,550 |
| Effective rate | £54,550 / £220,000 | 24.80% |
As profits approach £250,000, the marginal relief shrinks and the effective rate approaches 25%.
Effective rate at different profit levels
This table shows how the effective Corporation Tax rate changes as profits move through the marginal band:
| Taxable Profits | CT at 25% | Marginal Relief | CT Payable | Effective Rate |
|---|---|---|---|---|
| £30,000 | £7,500 | £3,300* | £5,700 | 19.00% |
| £50,000 | £12,500 | £3,000 | £9,500 | 19.00% |
| £60,000 | £15,000 | £2,850 | £12,150 | 20.25% |
| £80,000 | £20,000 | £2,550 | £17,450 | 21.81% |
| £100,000 | £25,000 | £2,250 | £22,750 | 22.75% |
| £120,000 | £30,000 | £1,950 | £28,050 | 23.375% |
| £150,000 | £37,500 | £1,500 | £36,000 | 24.00% |
| £200,000 | £50,000 | £750 | £49,250 | 24.625% |
| £250,000 | £62,500 | £0 | £62,500 | 25.00% |
| £300,000 | £75,000 | £0 | £75,000 | 25.00% |
*For profits at or below £50,000, the relief is capped at the amount needed to bring the effective rate to 19%.
The effective rate rises steeply through the band. A company earning £100,000 pays an effective rate of 22.75%, while a company earning £200,000 pays 24.625%. The marginal rate on each pound within the band is a constant 26.5%.
For a detailed calculation of your specific Corporation Tax bill, use our tax calculator.
What Are Augmented Profits?
Augmented profits are used to determine which rate band your company falls into. They consist of:
Augmented profits = Taxable profits + Exempt distributions
Exempt distributions are dividends and other distributions received from non-associated companies. Dividends from associated companies are excluded.
For most owner-managed limited companies, augmented profits equal taxable profits because they rarely receive dividends from other companies. However, if your company holds investments in other companies and receives dividends, those dividends are added to your taxable profits to determine your rate band, even though the dividends themselves are not taxed.
Example: Your company has taxable profits of £45,000 and receives £10,000 in dividends from an unconnected listed company. Your augmented profits are £55,000, which puts you into the marginal relief band even though your taxable profits alone would qualify for the small profits rate. You pay Corporation Tax only on the £45,000 of taxable profits, but the rate applied is based on the £55,000 augmented figure.
How Do Associated Companies Affect the Thresholds?
The £50,000 lower limit and £250,000 upper limit are divided equally between associated companies. This is one of the most significant factors affecting which Corporation Tax rate you pay.
What counts as an associated company?
Since 1 April 2023, a company is associated with another company if:
- One company controls the other, or
- Both companies are under the control of the same person or persons
Control means holding the majority of voting rights, the right to the majority of distributable profits, or the right to the majority of assets on a winding up. The test includes rights held by connected persons (spouses, civil partners, minor children, business partners, and certain trustees).
Who counts as associated?
| Scenario | Associated? |
|---|---|
| Director owns 100% of Company A and 100% of Company B | Yes |
| Director owns 60% of Company A, spouse owns 60% of Company B | Yes (connected persons) |
| Director owns 51% of Company A, unconnected person owns 100% of Company B | No |
| Parent company owns 100% of a subsidiary | Yes |
| Director owns 80% of Company A and 30% of Company B (remaining 70% held by unconnected person) | No (no control of Company B) |
Dormant company exclusion
A company that has not carried on any trade or business at any time during the accounting period is excluded from the associated company count. This means a genuinely dormant holding company or shell company does not reduce your thresholds.
However, HMRC scrutinises dormancy claims. A company that holds investments, receives rental income, or has any form of trading activity is not dormant for these purposes. Simply not filing accounts does not make a company dormant.
Impact on thresholds
The thresholds are divided by 1 + the number of associated companies:
| Number of Associated Companies | Lower Limit | Upper Limit |
|---|---|---|
| 0 (standalone) | £50,000 | £250,000 |
| 1 | £25,000 | £125,000 |
| 2 | £16,667 | £83,333 |
| 3 | £12,500 | £62,500 |
| 4 | £10,000 | £50,000 |
| 5 | £8,333 | £41,667 |
Worked example 5: Associated companies and marginal relief
A director owns 100% of two active companies. Company A has taxable profits of £70,000. Company B has taxable profits of £30,000. Both companies have the same year-end.
Each company has one associated company, so the thresholds are halved:
- Lower limit per company: £50,000 / 2 = £25,000
- Upper limit per company: £250,000 / 2 = £125,000
Company A (£70,000 profits):
CT at 25% = £17,500
Marginal relief = 3/200 x (£125,000 - £70,000) x 1 = 3/200 x £55,000 = £825
CT payable = £17,500 - £825 = £16,675
Effective rate = 23.82%
Company B (£30,000 profits):
CT at 25% = £7,500
Marginal relief = 3/200 x (£125,000 - £30,000) x 1 = 3/200 x £95,000 = £1,425
CT payable = £7,500 - £1,425 = £6,075
Effective rate = 20.25%
Without the associated company, Company B would pay 19% (£5,700). The association costs Company B an extra £375 per year. Company A pays 23.82% instead of the 21.81% it would pay as a standalone company.
The 51% group rule is gone
Before 1 April 2023, the test used "related 51% group companies." This meant only companies connected through 51% direct or indirect ownership counted. The current associated companies rules are broader because they look at common control by the same person or persons, including connected persons. Some companies that were not caught under the old rules are now associated.
How Do Short Accounting Periods Affect the Rates?
If your accounting period is shorter than 12 months, the upper and lower limits are reduced proportionally by the fraction:
Number of days in the accounting period / 365
This can happen when a company is newly incorporated, changes its year-end, or ceases trading.
Example: A company incorporates on 1 July 2025 with a first accounting period ending 31 March 2026 (274 days). It has no associated companies.
- Lower limit: £50,000 x 274/365 = £37,534
- Upper limit: £250,000 x 274/365 = £187,671
If the company has taxable profits of £45,000, it falls into the marginal relief band even though £45,000 would normally qualify for the small profits rate in a full 12-month period.
If the company also has one associated company, the limits are first divided by 2 (for the association) and then reduced for the short period:
- Lower limit: (£50,000 / 2) x 274/365 = £18,767
- Upper limit: (£250,000 / 2) x 274/365 = £93,836
When Must You Pay Corporation Tax?
The payment deadline depends on the size of your company.
Standard payment: 9 months and 1 day
Most companies pay Corporation Tax in a single lump sum, due 9 months and 1 day after the end of the accounting period.
| Year-End | Payment Due |
|---|---|
| 31 March 2026 | 1 January 2027 |
| 31 December 2025 | 1 October 2026 |
| 30 June 2025 | 1 April 2026 |
| 30 September 2025 | 1 July 2026 |
This applies to companies that are not "large" for quarterly instalment purposes.
Quarterly instalment payments (QIPs) for large companies
A company is "large" if its augmented profits exceed £1,500,000 (divided by the number of associated companies plus one). Large companies must pay Corporation Tax in four equal quarterly instalments during the accounting period, rather than nine months after it ends.
For a 12-month accounting period, the four instalments are due on the 14th day of months 7, 10, 13, and 16 of the accounting period (counting from month 1 as the first month).
QIP dates for a year-end of 31 March 2026:
| Instalment | Due Date | Month of AP |
|---|---|---|
| 1st | 14 October 2025 | Month 7 |
| 2nd | 14 January 2026 | Month 10 |
| 3rd | 14 April 2026 | Month 13 |
| 4th | 14 July 2026 | Month 16 |
Each instalment is one quarter of the estimated Corporation Tax liability for the period. If your estimate changes during the year, you can adjust later instalments.
Exemption: A company does not need to pay by instalments if its total Corporation Tax liability for the period is less than £10,000, even if its profits exceed the threshold.
First-year exemption: A company that was not large in the previous accounting period and has profits of no more than £10 million (divided by associated companies) does not need to pay by instalments in its first year of being large.
Quarterly instalments for very large companies
A company is "very large" if its augmented profits exceed £20,000,000 (divided by associated companies). Very large companies pay earlier, with instalments due on the 14th day of months 3, 6, 9, and 12 of the accounting period.
QIP dates for very large companies with a year-end of 31 March 2026:
| Instalment | Due Date | Month of AP |
|---|---|---|
| 1st | 14 June 2025 | Month 3 |
| 2nd | 14 September 2025 | Month 6 |
| 3rd | 14 December 2025 | Month 9 |
| 4th | 14 March 2026 | Month 12 |
QIP threshold impact of associated companies
| Associated Companies | Large Company Threshold | Very Large Threshold |
|---|---|---|
| 0 | £1,500,000 | £20,000,000 |
| 1 | £750,000 | £10,000,000 |
| 2 | £500,000 | £6,666,667 |
| 3 | £375,000 | £5,000,000 |
| 4 | £300,000 | £4,000,000 |
When Must You File the CT600 Return?
The CT600 Corporation Tax return must be filed with HMRC within 12 months of the end of the accounting period. This is separate from and later than the payment deadline.
| Year-End | Payment Deadline | Filing Deadline |
|---|---|---|
| 31 March 2026 | 1 January 2027 | 31 March 2027 |
| 31 December 2025 | 1 October 2026 | 31 December 2026 |
| 30 June 2025 | 1 April 2026 | 30 June 2026 |
The CT600 must include:
- The company's tax computation
- Full statutory accounts (iXBRL tagged)
- Any supplementary pages (CT600A for close companies, CT600E for charities, etc.)
The return must be filed online. There is no paper filing option.
For a step-by-step guide to completing the CT600, see our CT600 filing guide.
What Are the Penalties for Late Filing?
HMRC applies automatic fixed penalties for late CT600 returns, regardless of whether any Corporation Tax is owed.
Current penalties (filing dates before 1 April 2026)
| How Late | Penalty |
|---|---|
| 1 day late | £100 |
| 3 months late | Additional £100 (£200 total) |
| 6 months late | 10% of unpaid tax (HMRC issues estimated assessment) |
| 12 months late | Additional 10% of unpaid tax |
If you file three consecutive returns late, the fixed penalties double: £500 for the first day, and £500 after three months, making £1,000 in fixed penalties before any tax-geared penalties.
New penalties from 1 April 2026
Corporation Tax late filing penalties are doubling from 1 April 2026. This is the first increase since the penalty regime was introduced in 1998.
| How Late | Current Penalty | New Penalty (from Apr 2026) |
|---|---|---|
| 1 day late | £100 | £200 |
| 3 months late | +£100 | +£200 |
| 6 months late | 10% of unpaid tax | 10% of unpaid tax (unchanged) |
| 12 months late | +10% of unpaid tax | +10% of unpaid tax (unchanged) |
| Repeated late filing (3+ consecutive) | £500 + £500 | £1,000 + £1,000 |
The new penalties apply to returns with filing deadlines on or after 1 April 2026. For detailed information on the penalty changes, see our guide to Corporation Tax penalties doubling in April 2026.
Late payment interest (not penalties)
There are no separate penalties for paying Corporation Tax late. Instead, HMRC charges interest on any unpaid tax from the day after the payment deadline until the date of payment. The current rate is 7.75% per annum (Bank of England base rate plus 4%, as of January 2026). Interest is calculated daily and compounded.
Example: If you owe £20,000 and pay 3 months late, the interest charge is approximately:
£20,000 x 7.75% x (90/365) = £382
HMRC also pays interest on overpayments, but at the lower rate of 3.75% (base rate minus 1%).
For a full guide to Corporation Tax deadlines, see our Corporation Tax deadline guide.
How Does Loss Relief Work for Corporation Tax?
Trading losses can be used to reduce your Corporation Tax bill, either in the current period, carried back to previous periods, or carried forward to future periods.
Current year relief
A trading loss can be set against the company's total profits (including investment income and chargeable gains) of the same accounting period. This is usually claimed automatically in the CT600.
Carry-back relief: 1 year
If the loss exceeds total profits for the current period, the surplus can be carried back and set against total profits of the preceding 12 months. The company must have been carrying on the same trade in the carry-back period. Claims must be made within 2 years of the end of the loss-making period.
Example: A company makes a trading loss of £80,000 in the year ended 31 March 2026. It had taxable profits of £60,000 in the year ended 31 March 2025. It can carry back £60,000 of the loss to the prior year, reclaiming up to £60,000 x the effective rate paid. The remaining £20,000 is available for carry-forward.
Carry-forward relief: unlimited duration
Unused trading losses can be carried forward indefinitely against future profits of the same trade. Since 1 April 2017, carried-forward losses can also be set against total profits (not just trading profits), subject to a restriction:
- Deductions allowance: The first £5,000,000 of carried-forward losses can be used without restriction each year
- 50% cap: Beyond the £5,000,000 allowance, only 50% of remaining profits can be offset by carried-forward losses
For most small companies, the £5,000,000 allowance means the cap will never bite. It primarily affects larger companies with substantial historic losses.
Terminal loss relief
If a company ceases trading and makes a loss in its final 12 months, it can carry back the terminal loss against profits of the same trade for up to three years before the final period, on a last-in-first-out basis. This is more generous than the standard one-year carry-back.
Capital losses
Capital losses can only be offset against capital gains (not trading profits). They can be carried forward indefinitely but cannot be carried back.
How Do R&D Tax Credits Interact with Corporation Tax?
Research and development tax relief reduces your Corporation Tax bill or provides a cash payment if your company is loss-making. The current schemes (from 1 April 2024 onwards) are:
Merged R&D Expenditure Credit (RDEC)
This is the main scheme for all companies, replacing the separate SME and large company schemes. The credit rate is 20% of qualifying R&D expenditure. The credit is taxable, so after Corporation Tax at 25%, the net benefit is approximately 15% of qualifying spend (or 16.2% for companies paying the small profits rate).
The credit is set against your Corporation Tax liability. Any excess can be paid as a cash credit.
Enhanced R&D Intensive Support (ERIS)
Available to loss-making SMEs where R&D expenditure represents at least 30% of total expenditure. These companies can claim an additional 86% deduction on qualifying R&D costs (on top of the 100% already in the accounts, for a total 186% deduction), and can surrender losses for a payable tax credit of up to 14.5% of the surrenderable loss.
Impact on marginal relief
R&D tax credits reduce your Corporation Tax liability, which means your augmented profits remain the same but your effective rate drops. A company in the marginal band that claims R&D relief benefits from both the relief itself and the marginal relief reduction.
What Is the Close Company Loans to Participators Charge?
Most UK limited companies with five or fewer shareholders (or where all shareholders are directors) are classified as "close companies." If a close company makes a loan to a participator (shareholder or director) that remains outstanding nine months and one day after the end of the accounting period, the company must pay a charge under Section 455 of the Corporation Tax Act 2010.
The s455 charge rate
The current rate is 33.75% of the outstanding loan balance. This is not Corporation Tax. It is a separate charge designed to discourage untaxed extraction of company funds.
How it works
- Director borrows £10,000 from the company during the accounting period
- The loan is still outstanding 9 months and 1 day after the period end
- The company pays 33.75% x £10,000 = £3,375 to HMRC
- When the director repays the loan, the company reclaims the £3,375
The charge is reported on supplementary page CT600A of the Corporation Tax return.
Avoiding the charge
- Repay the loan within 9 months and 1 day of the year-end
- Declare a dividend to offset the loan (but this triggers income tax)
- Treat the amount as salary or bonus (subject to PAYE and NIC)
HMRC has introduced anti-avoidance rules targeting "bed and breakfasting" arrangements where loans are repaid just before the deadline and re-borrowed shortly after. Loans repaid and re-borrowed within 30 days, or arrangements where the repayment amount exceeds £5,000 and at least £5,000 is re-borrowed within 30 days, are caught.
How Do You Calculate Corporation Tax for a Short Accounting Period?
A short accounting period arises when a company is newly incorporated, changes its year-end, or ceases trading. The Corporation Tax thresholds are reduced proportionally.
Example: A company incorporates on 1 October 2025 with a year-end of 31 March 2026. The first accounting period is 182 days (1 October 2025 to 31 March 2026).
- Lower limit: £50,000 x 182/365 = £24,932
- Upper limit: £250,000 x 182/365 = £124,658
If the company has taxable profits of £30,000:
CT at 25% = £7,500
Marginal relief = 3/200 x (£124,658 - £30,000) x 1 = 3/200 x £94,658 = £1,420
CT payable = £7,500 - £1,420 = £6,080
Effective rate = 20.27%
If this had been a full 12-month period, £30,000 of profits would attract the 19% small profits rate (£5,700). The short period has pushed the company into the marginal band, costing an extra £380.
How Has Corporation Tax Changed Over Time?
Understanding the history helps explain why the current two-rate system exists and where rates might go next.
Corporation Tax rate history
| Financial Year | Main Rate | Small Companies Rate | Notes |
|---|---|---|---|
| 1997-1998 | 31% | 21% | Labour government inherits from Conservatives |
| 1999-2000 | 30% | 20% | 10% starting rate introduced |
| 2002-2003 | 30% | 19% | Starting rate cut to 0% (later abolished) |
| 2006-2007 | 30% | 19% | 0% starting rate abolished |
| 2008-2009 | 28% | 21% | Small companies rate rises |
| 2010-2011 | 28% | 21% | Coalition government takes office |
| 2011-2012 | 26% | 20% | Start of sustained rate reductions |
| 2012-2013 | 24% | 20% | |
| 2013-2014 | 23% | 20% | |
| 2014-2015 | 21% | 20% | Rates converging |
| 2015-2016 | 20% | 20% | Unified single rate |
| 2016-2017 | 20% | N/A | Single rate for all companies |
| 2017-2018 | 19% | N/A | Lowest main rate in G7 history |
| 2018-2019 | 19% | N/A | |
| 2019-2020 | 19% | N/A | Planned cut to 17% cancelled |
| 2020-2021 | 19% | N/A | COVID-19 pandemic |
| 2021-2022 | 19% | N/A | Rate increase announced |
| 2022-2023 | 19% | N/A | Last year of unified rate |
| 2023-2024 | 25% | 19% | Two-rate system returns |
| 2024-2025 | 25% | 19% | |
| 2025-2026 | 25% | 19% | Current year |
Key milestones
1997-2010: Gradual reduction. The main rate fell from 31% to 28% under Labour. The small companies rate fluctuated between 19% and 21%. The controversial 0% starting rate (2002-2006) was intended to help small businesses but was widely abused for tax-free extraction and was abolished.
2010-2016: Aggressive cuts. The Coalition and Conservative governments cut the main rate from 28% to 20% in six years, then to 19% in 2017. The small companies rate was merged into the main rate from 2015. The UK had the lowest Corporation Tax rate in the G20.
2017-2022: Unified at 19%. A single flat rate of 19% applied to all companies regardless of size. A planned further cut to 17% was cancelled due to COVID-19.
2023-present: Two-rate system returns. The main rate rose to 25% from April 2023 to help pay for pandemic spending. The small profits rate of 19% was reintroduced simultaneously to protect smaller companies. Marginal relief returned for the first time since 2015.
International context
At 25%, the UK main rate is now closer to the OECD average of approximately 23.5%. The 19% small profits rate remains competitive for small businesses. France (25%), Germany (approximately 30% including trade tax), and the US (21% federal) provide comparison points.
What About Companies Straddling Two Financial Years?
A Corporation Tax financial year runs from 1 April to 31 March. If your accounting period straddles two financial years (which most accounting periods ending on dates other than 31 March do), the profits are apportioned between the two financial years and each portion is taxed at the rates for that year.
In practice, this only matters when rates change between financial years. Since the rates for financial years 2023, 2024, and 2025 are all identical (19% / 25%), there is currently no practical impact for most companies.
If rates were to change from 1 April 2026, a company with a 31 December 2026 year-end would need to apportion profits: 91 days (1 January to 31 March 2026) at the old rates, and 275 days (1 April to 31 December 2026) at the new rates.
What Reliefs and Allowances Reduce the Corporation Tax Bill?
Beyond marginal relief and loss relief, several deductions and allowances can reduce your taxable profits:
Annual Investment Allowance (AIA)
100% first-year deduction on qualifying plant and machinery expenditure up to £1,000,000 per year. This covers equipment, vehicles (excluding cars), fixtures, and tools. The AIA has been permanently set at £1,000,000 since April 2023.
Full expensing
Since April 2023, companies can deduct 100% of qualifying main-rate plant and machinery expenditure in the year of purchase (full expensing) or 50% of special-rate assets (50% first-year allowance). Unlike the AIA, full expensing has no monetary cap.
Trading and property allowances
Small amounts of miscellaneous income can benefit from the £1,000 trading allowance and £1,000 property allowance, though these are more relevant for unincorporated businesses.
Patent Box
Companies with qualifying patent income can elect for an effective Corporation Tax rate of 10% on profits attributable to patents. This requires a patent granted by the UK IPO, EPO, or certain EEA patent offices.
Creative industry reliefs
Enhanced deductions are available for qualifying expenditure in film, TV, animation, video games, theatre, orchestra, and museums. Rates vary by sector.
Frequently Asked Questions
What is the Corporation Tax rate for small companies in 2025/26?
The small profits rate is 19%, applying to companies with taxable profits of £50,000 or less. This is not an exemption or a separate tax. Companies are charged at the main rate of 25% and then claim marginal relief to reduce the effective rate to 19%. The result is the same: if your profits are at or below £50,000, you pay 19%.
Do I pay 19% or 25% Corporation Tax?
It depends on your augmented profits and the number of associated companies. If your profits are £50,000 or less (adjusted for associated companies), you pay an effective rate of 19%. If your profits exceed £250,000 (adjusted), you pay 25%. Between those thresholds, you pay an effective rate between 19% and 25%. Use our tax calculator to find your exact rate.
How is marginal relief calculated for Corporation Tax?
Marginal relief is calculated using the HMRC formula: 3/200 x (Upper Limit - Augmented Profits) x (Taxable Profits / Augmented Profits). The fraction 3/200 equals 0.015. The upper limit is £250,000 for a standalone company with a 12-month accounting period. The relief is subtracted from the Corporation Tax charged at the main rate of 25%. This produces an effective tax rate between 19% and 25% for profits in the marginal band.
What are associated companies for Corporation Tax purposes?
Since 1 April 2023, a company is associated with your company if one has control of the other, or both are under common control of the same person or persons. Control includes rights held by connected persons such as spouses, civil partners, and minor children. Dormant companies that have not carried on any trade or business during the period are excluded. Each associated company reduces the £50,000 and £250,000 thresholds — divide by the total number of associated companies plus one.
When is Corporation Tax due for payment?
For most companies, Corporation Tax is due 9 months and 1 day after the end of the accounting period. For a 31 March 2026 year-end, the payment deadline is 1 January 2027. Large companies (augmented profits over £1,500,000, divided by associated companies) must pay in four quarterly instalments during the accounting period. Very large companies (over £20,000,000) pay even earlier.
What happens if I file my Corporation Tax return late?
A late CT600 return triggers automatic fixed penalties: £100 after 1 day, another £100 after 3 months, 10% of unpaid tax after 6 months, and a further 10% after 12 months. From 1 April 2026, the fixed penalties are doubling to £200 and £200. Repeated late filing (three consecutive late returns) increases the fixed penalties to £500 each under the current rules, or £1,000 each from April 2026. See our Corporation Tax penalties guide for full details.
Can I carry Corporation Tax losses forward?
Yes. Trading losses can be carried forward indefinitely against future profits of the same trade. Since April 2017, carried-forward losses can also be set against total profits (not just trading profits), subject to a £5,000,000 annual deductions allowance and a 50% restriction on profits above that allowance. Losses can also be carried back one year (or three years on cessation of trade). The claim must be made within two years of the end of the loss-making period.
What is the effective marginal rate of Corporation Tax between £50,000 and £250,000?
The effective marginal rate on each additional pound of profit within the band is 26.5%. This is because the main rate of 25% applies, but marginal relief is simultaneously being withdrawn at a rate of 1.5% (3/200) per pound. The combined effect is 25% + 1.5% = 26.5%. This means profits in the marginal band are taxed more heavily per pound than profits above £250,000, which are taxed at a flat 25%.
Does a dormant company count as an associated company?
No, provided it has genuinely not carried on any trade or business at any time during the relevant accounting period. A company that holds investments, receives rental income, or has any commercial activity is not dormant for Corporation Tax purposes. HMRC can challenge dormancy claims, so the company must be genuinely inactive with no transactions other than filing fees and statutory obligations.
How do I calculate Corporation Tax if my accounting period is less than 12 months?
The £50,000 lower limit and £250,000 upper limit are reduced proportionally by the number of days in the accounting period divided by 365. A 6-month accounting period would halve the thresholds to £25,000 and £125,000. If you also have associated companies, the thresholds are first divided by the number of associated companies plus one, and then reduced for the short period. The marginal relief formula uses these adjusted limits.
Is there a Corporation Tax rate change planned for 2026/27?
No change to the 19% small profits rate or 25% main rate has been announced for the financial year 2026 (starting 1 April 2026). The Autumn Budget 2025 confirmed rates remain unchanged. The only Corporation Tax change from April 2026 is the doubling of late filing penalties. The government has stated it intends to maintain a competitive rate to attract business investment.
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