The short answer
- Profits up to £50,000: 19%, the small profits rate.
- Profits of £250,000 or more: 25%, the main rate, on all of it.
- In between: 25% less marginal relief, which works out at 19% on the first £50,000 and 26.5% on the rest.
| Taxable profit | Corporation Tax | Effective rate | Profit after tax |
|---|---|---|---|
| £25,000 | £4,750 | 19.00% | £20,250 |
| £50,000 | £9,500 | 19.00% | £40,500 |
| £75,000 | £16,125 | 21.50% | £58,875 |
| £100,000 | £22,750 | 22.75% | £77,250 |
| £150,000 | £36,000 | 24.00% | £114,000 |
| £200,000 | £49,250 | 24.63% | £150,750 |
| £300,000 | £75,000 | 25.00% | £225,000 |
The rates and limits
Corporation Tax rates are set for financial years, which run from 1 April to 31 March. The rates have been the same since 1 April 2023 and are unchanged for the financial year starting 1 April 2026.
| Profit | Rate |
|---|---|
| Up to £50,000 (lower limit) | 19% small profits rate |
| £50,001 to £249,999 | 25% less marginal relief |
| £250,000 or more (upper limit) | 25% main rate |
The limits are for a 12-month period and a company with no associated companies. Ring-fenced oil and gas profits are taxed under separate rules not covered here.
How marginal relief works
A company with profits between the limits works out tax at 25% on all its profit, then takes off marginal relief:
Marginal relief = 3/200 × (upper limit − profits)
- Tax at 25%£25,000
- Marginal relief: 3/200 × (£250,000 − £100,000)−£2,250
- Corporation Tax£22,750
The same answer comes from 19% on the first £50,000 (£9,500) plus 26.5% on the next £50,000 (£13,250). That is why the band is often described as having a 26.5% marginal rate.
If the company receives dividends from other, non-group companies, these are added to profit to give augmented profits. Augmented profits decide the rate, but the dividends themselves are not taxed. The relief is then scaled by taxable profit ÷ augmented profits.
The rate on each extra pound
This matters for decisions made before the year end. In the marginal band, every £1,000 of extra profit costs £265 in tax, and every £1,000 of extra allowable spending saves £265. Below £50,000 the saving is £190; above £250,000 it is £250.
What profit is taxed
Corporation Tax is charged on the company’s taxable profits. To get there from your accounts:
- start with the profit in the accounts;
- add back costs that are not allowable for tax, such as client entertaining, fines and accounting depreciation;
- take off capital allowances on equipment, vans and machinery;
- take off any trading losses brought forward;
- add any taxable gains on assets the company sold.
Directors’ salaries, employer National Insurance and employer pension contributions are all deductible. Dividends paid to shareholders are not: they come out of profit after Corporation Tax.
Capital allowances
The Annual Investment Allowance gives 100% relief on up to £1 million a year of most plant and machinery. Companies can also claim full expensing on new main-rate equipment. Cars are treated differently and get writing-down allowances based on their emissions.
Associated companies
If two or more companies are under the same control, the £50,000 and £250,000 limits are shared between them. They are divided by the number of associated companies plus one.
- Lower limit: £50,000 ÷ 2£25,000
- Upper limit: £250,000 ÷ 2£125,000
- Tax at 25%£10,000
- Marginal relief: 3/200 × (£125,000 − £40,000)−£1,275
On its own, the same company would pay £7,600 at 19%. Associated companies include companies controlled by the same person, and in some cases by close relatives or business partners where there is substantial commercial interdependence. Dormant companies and passive holding companies are not counted.
Short accounting periods
A company’s first accounting period is often shorter or longer than 12 months. An accounting period for Corporation Tax can never be longer than 12 months, so a longer first set of accounts is split into two periods.
For a period shorter than 12 months, the limits are reduced pro rata.
- Lower limit: £50,000 × 6/12£25,000
- Upper limit: £250,000 × 6/12£125,000
- Tax at 25% less marginal relief£7,500 − £1,425
Legitimate ways to reduce the bill
- Employer pension contributions. Paid by the company and normally deductible. A £10,000 contribution on £100,000 of profit saves £2,650 of Corporation Tax, and the director pays no tax or NI on it going in.
- Timing equipment purchases. Buying needed equipment before the year end brings the capital allowance into this year.
- Claiming every allowable cost, including use of home, mileage at the approved rates, and accountancy and software.
- Research and development relief for qualifying projects that seek an advance in science or technology.
- Using losses from earlier years, or carrying a current loss back to the previous year.
Spending to save tax still costs money
A £1,000 cost saves at most £265 of tax. Only spend on things the business needs.
Paying and filing
- Within 3 months of startingRegister for Corporation Tax
Usually done when the company is set up at Companies House.
- 9 months and 1 dayPay Corporation Tax
After the end of the accounting period. A 31 March 2027 year end means paying by 1 January 2028.
- 9 monthsFile accounts at Companies House
For private companies, after the year end (the first accounts can differ).
- 12 monthsFile the company tax return (CT600)
After the end of the accounting period.
The tax is due before the return. Large companies, with profits over £1.5 million (divided between associated companies), pay in quarterly instalments starting during the year. Late payment interest runs from the due date, and late returns bring penalties starting at £200.
Getting money out of the company
Profit after Corporation Tax belongs to the company. To get it to you, a director usually takes a small salary plus dividends. Dividends carry their own tax: from April 2026, 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band, after a £500 allowance.
The combined rate of Corporation Tax and dividend tax on the same profit can be close to, or above, what a sole trader pays. The dividend vs salary calculator finds the best split for your profit, and the sole trader tax calculator shows the comparison.
Capital allowances in practice
Spending on equipment for the business is not deducted like an everyday cost in the accounts, but capital allowances usually give the same result for tax. With the Annual Investment Allowance, a company can deduct the full cost of most plant and machinery, including vans, tools, computers and furniture, in the year it buys them.
- Corporation Tax on £100,000£22,750
- Profit after the allowance£80,000
- Corporation Tax on £80,000£17,450
The saving is 26.5% because the whole £20,000 comes out of the marginal band. The same purchase would save £3,800 for a company with profits under £50,000 and £5,000 for one above £250,000. Cars are the main exception: they get writing-down allowances spread over several years, unless they are new and zero-emission.
When you later sell an asset you claimed allowances on, the sale price usually comes back into profit as a balancing charge. Keep a simple register of what you bought, when, and what you claimed.
A growing company
A company’s rate changes as it grows. Here is one business over three years:
| Year | Taxable profit | Corporation Tax | Effective rate |
|---|---|---|---|
| Year 1 | £40,000 | £7,600 | 19.0% |
| Year 2 | £90,000 | £20,100 | 22.3% |
| Year 3 | £180,000 | £43,950 | 24.4% |
In year 1 every extra pound was taxed at 19%. From year 2 the company is in the marginal band, where each extra pound costs 26.5%. That is the point at which timing spending and pension contributions starts to make a bigger difference.
Investment companies and other income
Corporation Tax is charged on all of a company’s taxable profits, not just its trading profit. Rental income, interest and most gains on selling assets are added in. Dividends from other UK companies are usually not taxed, but they can push up the rate on the rest, as shown earlier.
A close investment-holding company, broadly a company controlled by five or fewer people that mainly holds investments rather than trading or letting property to unconnected tenants, pays 25% on all its profits whatever their size. The small profits rate and marginal relief do not apply.
Losses in more detail
If the company makes a trading loss, there is no Corporation Tax to pay for that period, and the loss can be used:
- against other profits of the same period, such as rental income or gains;
- carried back against the previous 12 months’ profits, giving a refund of tax already paid;
- carried forward against future profits, subject to limits for very large amounts;
- in a group, surrendered to another group company with profits.
A carry-back can be valuable in a downturn because it turns a loss into cash quickly. Claim it on the company tax return for the loss-making period.
Records, accounts and the return
Every limited company has to keep accounting records and produce annual accounts, whether or not it owes any Corporation Tax. The Corporation Tax return, form CT600, is filed with HMRC online and includes:
- the company’s full accounts for the period, in a tagged digital format;
- a tax computation showing how the accounts profit becomes taxable profit;
- claims for capital allowances, losses and reliefs such as research and development.
Most small companies use accounting software or an accountant to prepare both. Records must normally be kept for six years from the end of the accounting period, longer if there is an open enquiry.
Even a company with no taxable profit must file a return if HMRC sends a notice to file. From 1 April 2026 the fixed penalties doubled: £200 for a late return, £400 if it is more than three months late, and up to £2,000 for repeated lateness, with further tax-geared penalties after six and twelve months. Set reminders for both the payment and the filing date.