Corporation tax in the UK currently operates across three effective bands — not two. Most directors know about the 19% small profits rate and the 25% main rate, but the marginal relief band between them produces an effective rate of 26.5% on profits in the £50,000–£250,000 range. That makes the middle band more expensive per pound of profit than the headline main rate above it.
- Small profits rate (up to £50,000): 19%
- Main rate (above £250,000): 25%
- Marginal band effective rate: 26.5% on each extra pound between £50k–£250k
- Associated companies halve the thresholds: £25,000 / £125,000 each
- CT payment due: 9 months and 1 day after accounting period end
The three corporation tax rates for 2026-27
The current UK corporation tax structure has been in place since April 2023 and is unchanged for 2026-27. Three effective rates apply depending on your company's taxable profits for the period:
| Profit level | Rate | CT on example profits |
|---|---|---|
| Up to £50,000 | 19% small profits rate | £50,000 → £9,500 CT |
| £50,001–£250,000 | 19–25% blended (26.5% marginal) | See table below |
| Above £250,000 | 25% main rate | £300,000 → £75,000 CT |
How marginal relief is calculated
For profits in the £50,001–£250,000 band, HMRC applies a marginal relief reduction to the 25% main rate charge. The formula:
CT = (Profits × 25%) − [3/200 × (£250,000 − Profits)]
Worked example: £80,000 profit
| Step | Calculation | Result |
|---|---|---|
| CT at 25% (main rate) | £80,000 × 25% | £20,000 |
| Marginal relief deduction | 3/200 × (£250,000 − £80,000) = 3/200 × £170,000 | −£2,550 |
| CT due | £20,000 − £2,550 | £17,450 |
| Effective rate on £80,000 | £17,450 ÷ £80,000 | 21.8% |
The effective rate (21.8%) looks reasonable — but the marginal rate on each additional pound of profit within this band is 26.5%. That is higher than the 25% main rate and higher than the basic rate of income tax on salary.
CT across the profit spectrum
| Taxable profits | CT payable | Effective rate |
|---|---|---|
| £30,000 | £5,700 | 19.0% |
| £50,000 | £9,500 | 19.0% |
| £75,000 | £16,063 | 21.4% |
| £100,000 | £22,625 | 22.6% |
| £150,000 | £35,750 | 23.8% |
| £200,000 | £48,875 | 24.4% |
| £250,000 | £62,500 | 25.0% |
The 26.5% marginal rate — the planning incentive
If your profits are between £50,001 and £250,000, every pound you legitimately reduce to below £50,000 saves tax at 26.5% — more efficiently than if profits were above £250,000 (where savings are at 25%). Key tools:
- Employer pension contributions: fully CT-deductible, no employer NI, no benefit-in-kind — often the single most efficient lever
- Director salary: salary is deductible but generates employer NI at 15% — model the net position carefully
- Annual Investment Allowance: equipment purchases give 100% first-year CT deduction, pulling profits down immediately
- Timing of invoicing: if work spans year-end and can legitimately be billed in the next period, taxable profit falls this year
Example — pension to escape the marginal band: Profits of £56,000 — just £6,000 into the marginal band. An employer pension contribution of £7,000 brings profits to £49,000. CT saving: £7,000 × 26.5% = £1,855. Net cost to put £7,000 in your pension: £5,145. That compares favourably to taking dividends and contributing personally.
Associated companies: the threshold trap
If you control more than one company (directly or indirectly), the £50,000 and £250,000 thresholds are divided equally between them. Two associated companies each have thresholds of £25,000 and £125,000 respectively.
| Number of associated companies | Small profits threshold (each) | Main rate threshold (each) |
|---|---|---|
| 1 (just your company) | £50,000 | £250,000 |
| 2 | £25,000 | £125,000 |
| 3 | £16,667 | £83,333 |
| 4 | £12,500 | £62,500 |
This catches directors who set up a holding company alongside their trading company — suddenly both entities are in the marginal band at much lower profit levels. Dormant companies you control also count. Take advice before creating additional entities if CT planning matters.
What are taxable profits?
Taxable profits are not the same as accounting profit. Starting from accounting profit, you add back non-deductible items (client entertaining, depreciation) and deduct capital allowances. The result is taxable profits — what the CT rates apply to. Your accountant prepares this calculation as part of the CT600 return.
CT payment and filing deadlines
| Obligation | Deadline |
|---|---|
| CT payment (profits under £1.5m) | 9 months and 1 day after accounting period end |
| CT600 return filing | 12 months after accounting period end |
| Accounts to HMRC (iXBRL) | With the CT600 (12 months) |
| Accounts to Companies House | 9 months after accounting period end |
Example: 31 March year-end → CT payment by 1 January, CT600 by 31 March the following year. Note that HMRC does not typically send payment reminders — diary this date as soon as your year-end is known.
Common mistakes
- Confusing CT with dividend tax: the company pays CT on profits; you personally pay dividend tax when you draw dividends — both charges apply
- Ignoring the associated companies rule: a second company (even a dormant holding company) can halve your thresholds overnight
- Paying CT late: HMRC charges interest from the day after the due date, currently at above base rate
- Filing the CT600 without iXBRL accounts: HMRC requires accounts in iXBRL format submitted with the CT600 — your accountant handles this, but DIY filers often get this wrong
Use the calculator
Frequently asked questions
Are the 2026-27 CT rates confirmed?
Does the CT rate apply to all company profits?
When is corporation tax due?
What if my company makes a loss?
Is there a minimum CT payment?
Important: This guide is for general information only and does not constitute tax or legal advice. Tax rules change — always verify current rates and thresholds with HMRC or a qualified accountant before making decisions.