UK Corporation Tax rates 2026/27: how the 19% / 25% bands and marginal relief actually work

UK Corporation Tax rates 2026/27

From April 2023 onwards, the UK has operated two Corporation Tax rates with a tapered band between them. For 2026/27 the structure is:

The 26.5% figure is the effective rate that applies to profits in the marginal relief band. It is not a published statutory rate, it is what the marginal relief formula produces when you tax the first £50,000 at 19% and the slice up to £250,000 at the higher rate.

The £50,000 band: small profits rate

If taxable profits are at or below the lower limit, the small profits rate is 19%. The headline lower limit is £50,000, but it can be reduced for a short accounting period or where the associated-company rules apply.

Worked example: profits of £40,000 = £40,000 × 19% = £7,600 of Corporation Tax.

The £50,001 to £250,000 band: marginal relief

For profits in this middle band, the calculation has two steps:

1. Calculate Corporation Tax at the main rate (25%) on the full profit
2. Deduct marginal relief calculated as: (£250,000 − profits) × 3/200

The 3/200 fraction is set by HMRC and produces the smooth taper from 19% to 25%. The net effect on a slice of profit above £50,000 is an effective rate of 26.5%.

Worked example: £100,000 of profit

• Step 1: £100,000 × 25% = £25,000
• Step 2: marginal relief = (£250,000 − £100,000) × 3/200 = £2,250
• Corporation Tax payable: £25,000 − £2,250 = £22,750
• Effective average rate: 22.75%

The same answer arrives via the simpler 'bands' arithmetic: £50,000 × 19% + £50,000 × 26.5% = £9,500 + £13,250 = £22,750. That second method is easier to explain to clients but the HMRC formula above is what appears on the CT600 worksheet.

Worked example: £200,000 of profit

• Step 1: £200,000 × 25% = £50,000
• Step 2: marginal relief = (£250,000 − £200,000) × 3/200 = £750
• Corporation Tax payable: £50,000 − £750 = £49,250
• Effective average rate: 24.625%

Above £250,000: the main rate

Once profits exceed £250,000, marginal relief no longer applies. The entire profit is taxed at 25%. So £300,000 of profit means £75,000 of Corporation Tax (25% flat).

A common question: does marginal relief reduce the bill on the first £250,000 once profits exceed it? No. Once you cross the upper limit, the marginal relief calculation produces zero and 25% applies to the whole figure.

The associated companies trap

The £50,000 and £250,000 thresholds are divided by the total number of associated companies, including the company itself. Two associated companies each get £25,000 and £125,000 limits, three each get £16,667 and £83,333, and so on.

The £50,000 and £250,000 figures are divided by the total number of associated companies. Association is a statutory test, not a shortcut based solely on the number of directorships or company names. Check the current HMRC guidance before relying on a limit.

Worked example: two associated companies each with £40,000 profit

Without the associated companies rule, each would pay 19% (£7,600 each, total £15,200) because each profit figure is below £50,000. With associated companies, each company's small profits limit is £25,000, so each falls into marginal relief:

• Per company: £40,000 × 25% − (£125,000 − £40,000) × 3/200 = £10,000 − £1,275 = £8,725
• Total Corporation Tax across the group: £17,450
• Versus £15,200 if they were not associated
• Extra tax cost: £2,250 a year just from being associated

This is an illustration of the calculation where the companies are associated; it is not a conclusion about any particular family, holding-company or property structure.

Payment dates

Corporation Tax is usually payable 9 months and 1 day after the end of the accounting period. So:

• Year end 31 March 2027 → payment due by 1 January 2028
• Year end 30 June 2027 → payment due by 1 April 2028
• Year end 31 December 2027 → payment due by 1 October 2028

The CT600 tax return itself is due 12 months after the year end, but in practice we file at the same time as paying because both numbers come out of the same year-end accounts.

Quarterly instalments can apply to large companies. The relevant thresholds and dates can be affected by associated companies, so use the current HMRC guidance for the company’s position.

What about tax when a director takes money out?

For an owner-managed company, the relevant question is usually not 'how much Corporation Tax do I pay?' but 'how much total tax do I pay across the company and personal layers?'

Corporation Tax is a company tax. Salary and dividends can create separate personal tax consequences for a director, depending on their income and the company’s distributable reserves. That is a separate analysis from the Corporation Tax calculation.

The personal extraction mechanics are covered in our dividend tax guide.

What can affect taxable profit?

1. Identify allowable expenses. The tax treatment depends on the facts, supporting records and the applicable rules. Our allowable deductions guide covers what counts.
2. Capital allowances. Qualifying capital expenditure may have a different tax route from day-to-day expenses. Check HMRC’s current capital-allowance guidance.
3. Employer pension contributions. Their treatment depends on the company’s circumstances and the wholly-and- exclusively rule; they are not an automatic outcome.
4. Reliefs where the conditions are met. R&D and other reliefs have specific statutory conditions and evidence requirements.
5. Accounting-period facts. Income and expenditure must be recorded in the appropriate period under the relevant accounting and tax rules.

Official source

GOV.UK: Corporation Tax rates