Corporation tax is 19% on profits up to £50,000 and 25% on profits of £250,000 or more. Between the two, marginal relief tapers the bill so that the average rate climbs gradually from 19% to 25%, which means every extra pound of profit in that band is taxed at 26.5%. A company making £100,000 pays £22,750, an average of 22.75%. The rates have been in place since April 2023 and are unchanged for accounting periods in 2026/27.
The three zones
| Taxable profit | What applies | Average rate |
|---|---|---|
| Up to £50,000 | Small profits rate | 19% |
| £50,001 to £249,999 | Main rate less marginal relief | rises from 19% towards 25% |
| £250,000 and above | Main rate | 25% |
Marginal relief is calculated as 3/200 of the difference between £250,000 and the profit, deducted from tax at 25%. The arithmetic produces a smooth line between the two rates, but the slope of that line is the important figure: within the band, each additional £1 of profit costs 26.5p in tax, more than the main rate itself. The corporation tax calculator shows the bill, the average rate and the marginal rate for any profit.
What companies pay
| Taxable profit | Corporation tax | Average rate | Rate on the next £1 |
|---|---|---|---|
| £20,000 | £3,800 | 19% | 19% |
| £50,000 | £9,500 | 19% | 26.5% |
| £60,000 | £12,150 | 20.25% | 26.5% |
| £100,000 | £22,750 | 22.75% | 26.5% |
| £150,000 | £36,000 | 24% | 26.5% |
| £250,000 | £62,500 | 25% | 25% |
| £500,000 | £125,000 | 25% | 25% |
The 26.5% marginal rate in the middle band is why deductible spending is unusually valuable for companies making between £50,000 and £250,000: an employer pension contribution or a salary that reduces profit within the band saves 26.5p in the pound, against 19p below the band and 25p above it.
Associated companies and short periods
The £50,000 and £250,000 limits are divided by the number of associated companies, broadly companies under common control, plus one. A director who owns two trading companies has limits of £25,000 and £125,000 for each. The limits are also scaled down for an accounting period shorter than twelve months. Both rules catch small groups and people with more than one company, and they are the usual reason a company with modest profits finds itself in the marginal band.
What counts as taxable profit
The rates apply to taxable profit, which starts from the accounting profit and adjusts it for tax rules. Salaries, employer National Insurance and pension contributions, rent, software, professional fees and most day-to-day running costs are deductible. Client entertaining is not, and neither is depreciation, which is replaced by capital allowances on equipment, vehicles and other assets. Dividends are not a cost of the business and never reduce the figure. Because the marginal band taxes each extra pound at 26.5%, the timing of a large deductible purchase or pension contribution around the year end can move a company’s average rate by several points.
Paying and filing
Corporation tax is due nine months and one day after the end of the accounting period, and the company tax return is due twelve months after it. Companies with profits over £1.5 million pay in quarterly instalments instead. The tax is calculated on taxable profit after allowable expenses, capital allowances and salaries including employer National Insurance; dividends are paid out of what remains and are not deductible.
How it fits with taking money out
For an owner-managed company the corporation tax rate is the first layer of tax on profit; dividend tax on what is drawn is the second. A salary reduces the corporation tax bill because it is deductible, but carries employer National Insurance at 15% above £5,000 and the employee’s own tax. Our dividend tax guide sets out the second layer and the salary-plus-dividends comparison, and the sole trader versus limited company calculator compares the combined bill with paying income tax and Class 4 National Insurance as a sole trader on the same profit. The employer cost calculator prices a salary from the company’s side.
Common questions
What is the corporation tax rate for 2026/27? 19% on taxable profits up to £50,000, 25% on profits of £250,000 or more, and a tapered rate between the two through marginal relief. The limits are shared between associated companies.
How much corporation tax on £100,000 profit? £22,750, an average rate of 22.75%. The company sits in the marginal relief band, where each extra pound of profit is taxed at 26.5%.
What is marginal relief? A deduction from tax at the 25% main rate for companies with profits between £50,000 and £250,000, equal to 3/200 of the gap between £250,000 and the profit. It blends the two rates but makes the marginal rate in the band 26.5%.
When is corporation tax due? Nine months and one day after the end of the accounting period for most companies. The return itself is due twelve months after the period end.
Do associated companies pay more? Not a higher rate, but the £50,000 and £250,000 limits are divided between them, so each company reaches the marginal band and the main rate at lower profits.
Is corporation tax paid on dividends? No. Dividends are paid from profit after corporation tax and are taxed in the shareholder’s hands at the dividend rates instead.
Information, not financial advice. Rates and limits are the published figures on gov.uk: corporation tax rates; worked figures are estimates from the site’s calculator for a single company with a twelve-month period. Take accountancy advice on your own company’s position before acting on them.