What is the Corporation Tax rate in 2025?

Corporation Tax rates for the 2025/26 tax year (financial year 2025, starting 1 April 2025):

Main rate: 25% Applies to companies with taxable profits above £250,000. This rate was increased from 19% on 1 April 2023 and applies to all companies above the upper profits limit.

Small profits rate: 19% Applies to companies with taxable profits of £50,000 or less. This preserves the pre-April 2023 rate for the smallest companies. Around 70% of UK companies qualify for this rate.

Marginal relief: profits between £50,000 and £250,000 If your profits fall between the lower limit (£50,000) and the upper limit (£250,000), marginal relief applies. The effect is that your tax rate gradually increases from 19% to 25% as profits rise through this band.

The marginal relief formula is: 3/200 x (£250,000 - taxable profits). This fraction (3/200) is subtracted from the tax that would otherwise be due at the main rate. The result is an effective marginal rate of 26.5% on each pound of profit between £50,000 and £250,000. This is higher than 25% because the marginal relief band acts as a taper, not a cliff edge.

Effective tax rates at key profit levels: - £30,000 profit: 19.0% (£5,700 tax) - £50,000 profit: 19.0% (£9,500 tax) - £75,000 profit: 20.5% (£15,375 tax) - £100,000 profit: 21.25% (£21,250 tax, after marginal relief of £2,250) - £150,000 profit: 22.75% (£34,125 tax) - £200,000 profit: 23.5% (£47,000 tax) - £250,000 profit: 25.0% (£62,500 tax) - £500,000 profit: 25.0% (£125,000 tax)

Worked example with marginal relief: Company profit: £120,000 (no associated companies) - Step 1: Calculate tax at main rate: £120,000 x 25% = £30,000 - Step 2: Calculate marginal relief: 3/200 x (£250,000 - £120,000) = 3/200 x £130,000 = £1,950 - Step 3: Tax due: £30,000 - £1,950 = £28,050 - Effective rate: £28,050 / £120,000 = 23.375%

The effective rate of 23.375% is between the small profits rate (19%) and the main rate (25%), exactly as expected for a profit in the marginal relief band.

Associated companies and the impact on thresholds

The £50,000 and £250,000 limits are divided equally between all associated companies. A company is associated if it is controlled by the same person or group of persons. Dormant companies count as associated for this purpose.

• 1 company: limits are £50,000 and £250,000
• 2 associated companies: limits are £25,000 and £125,000 each
• 3 associated companies: limits are £16,667 and £83,333 each
• 5 associated companies: limits are £10,000 and £50,000 each

This means a director with multiple active companies (or even dormant shell companies) will face higher effective tax rates on each company's profits. If you control two companies each making £60,000 profit, neither qualifies for the small profits rate because the lower limit is £25,000 per company.

When is Corporation Tax due?

Corporation Tax is due 9 months and 1 day after the end of your accounting period. For a company with a 31 March year end, that means 1 January of the following year.

Companies with taxable profits over £1.5 million must pay in quarterly instalments. The instalments are due in months 7, 10, 13, and 16 of the accounting period. Very large companies (profits over £20 million) pay in months 3, 6, 9, and 12.

Filing your Corporation Tax return (CT600)

Your CT600 return is due 12 months after the end of your accounting period, which is 3 months after the payment deadline. Even if you have already paid the correct amount, you must still file the return. Late filing penalties start at £100 and increase to £1,100+ for returns more than 3 months late.

Key dates for a 31 March 2026 year end: - Accounting period ends: 31 March 2026 - Corporation Tax payment due: 1 January 2027 - CT600 return filing deadline: 31 March 2027

Tax planning considerations

If your profits are near the £50,000 lower limit or the £250,000 upper limit, small changes in expenses or income timing can have a disproportionate effect on your tax bill. For example, a company with £52,000 profit pays an effective rate of ~19.8%, but if it brought forward £3,000 of expenses to reduce profit to £49,000, it would pay exactly 19%. That £3,000 of timing would save approximately £400 in tax.

Similarly, pension contributions, capital allowances, and R&D tax credits can all reduce taxable profit. Directors should review these options before the year end, not after.