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 your company has profits at or below £50,000, you pay a flat 19% Corporation Tax. This is the rate most small UK limited companies pay. There is no marginal relief calculation, no associated company adjustment to worry about (if you control only one company), and the tax is calculated in one line.

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.

Two companies are associated if one controls the other, or both are controlled by the same person or group. 'Control' generally means owning more than 50% of the share capital, voting rights, or rights to distributions. There are exceptions (dormant companies, certain holding structures), but the default assumption when a director owns two trading companies is that they are associated.

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 catches a lot of family-business structures, particularly where a director has set up a separate property holding company alongside their trading company.

Payment dates

For small companies (profits below £1.5m), Corporation Tax is 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.

Large companies (profits over £1.5m) pay in quarterly instalments, with the first instalment due in month 7 of the accounting period. The threshold is also divided by associated companies.

The director's-eye view: combined tax position

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?'

A useful rule of thumb for 2026/27, taking £100,000 of company profit and distributing it as dividends to a basic-rate shareholder (plus a £12,570 salary):

• Corporation Tax on £100,000: about £22,750 (effective 22.75%)
• Remaining for dividend: about £77,250
• Personal dividend tax on the £77,250 (mostly higher rate): about £19,300
• Combined tax cost: about £42,050, or ~42% effective combined rate
• Net cash in pocket: about £57,950

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

The five legitimate ways to reduce Corporation Tax

1. Claim every allowable deduction. Trading costs, professional fees, mileage, employer pension contributions, training, software subscriptions, sub- contractors. Our allowable deductions guide covers what counts.
2. Capital allowances on plant and equipment. The Annual Investment Allowance covers up to £1m of qualifying capital expenditure each year, deductible in full against the year's profit.
3. Employer pension contributions. Deductible with no earnings cap. The single most powerful lever for most owner-managed companies.
4. R&D tax relief (if eligible). Specific qualification rules, but where genuine R&D exists the cash value is substantial.
5. Timing of profit and expenditure. Bringing forward planned expenditure into the current accounting period or deferring billable work into the next period can smooth profits across the £50,000 and £250,000 thresholds.