Corporation Tax Rates 2026-27: Small Profits, Marginal Relief, and Main Rate

The three corporation tax rates

From April 2023, corporation tax operates on a tiered system:

• 19% small profits rate — profits up to £50,000
• Marginal relief band — profits between £50,001 and £250,000 (effective marginal rate 26.5%)
• 25% main rate — profits above £250,000

These rates are unchanged for 2026-27. All three rates were introduced in April 2023 when the previous flat 19% rate was replaced by the current structure.

How marginal relief works

Marginal relief applies to profits between £50,000 and £250,000. The formula: tax at 25% minus (3/200 × (£250,000 − profit)). The effect is a smooth transition from 19% to 25% as profits increase through the band. However, the marginal rate on each additional pound of profit within the band is 26.5% — which is higher than the main rate. This creates a planning incentive to push profits either below £50,000 or above £250,000.

Associated companies impact

The thresholds divide by the number of associated companies. If you have two associated companies (e.g., your trading company and a holding company you control), each threshold is halved: small profits rate applies up to £25,000 per company, main rate above £125,000. This catches many directors who set up holding companies without realising the CT implications.

Planning the marginal band

If your profit is just above £50,000, the effective marginal rate on that excess is 26.5%. An employer pension contribution of, say, £5,000 that brings profit below £50,000 saves corporation tax at the marginal rate — worth £1,325 on that £5,000. Use the Corporation Tax calculator to model this for your numbers.