Home / Guides / Corporation Tax Rates UK 2026/27: Main Rate and Small Profits
Since April 2023, UK corporation tax has operated with two headline rates rather than one. Understanding which rate applies to a given company, how the transition between rates works, and how director and pension decisions interact with the rate is fundamental to planning around limited company profit.
Last updated May 2026. Written by the LimitedCompanyTaxCalculator.co.uk editorial team and reviewed against current GOV.UK and HMRC guidance. Results are estimates for planning only and are not tax, accounting or financial advice.
The small profits rate of 19% applies to companies with taxable profits at or below £50,000 in an accounting period. The main rate of 25% applies to companies with taxable profits above £250,000. These are not marginal rates applied to specific bands of profit — they are flat rates applied to total taxable profit once the threshold conditions are met.
A company with £45,000 in taxable profit pays £8,550 in corporation tax (19% × £45,000). A company with £260,000 in taxable profit pays £65,000 (25% × £260,000). There is no additional tax on the jump from just under £250,000 to just above — the main rate applies to the entire profit, not just the portion above the threshold.
Taxable profit is calculated after all allowable deductions: director salary, employer NI, company pension contributions, professional fees, and all other allowable business costs. These deductions can materially reduce the taxable profit figure and, therefore, which rate applies. A company with £55,000 in revenue-derived profit that pays a £12,570 director salary plus £1,139 employer NI would have taxable profit of approximately £41,291 — within the small profits band.
Between £50,000 and £250,000, neither rate applies cleanly. Instead, marginal relief smooths the transition by producing an effective corporation tax rate that rises gradually from 19% to 25% as profit increases through the band. The HMRC formula is: corporation tax = (profits × 25%) − (3/200 × (£250,000 − profits)).
For a company with £100,000 in taxable profit: £100,000 × 25% = £25,000, minus 3/200 × (£250,000 − £100,000) = 3/200 × £150,000 = £2,250. Corporation tax = £22,750. Effective rate: 22.75%. For a company with £175,000: £175,000 × 25% = £43,750, minus 3/200 × £75,000 = £1,125. Corporation tax = £42,625. Effective rate: 24.4%.
The marginal rate within the band — the rate on the last pound of profit — is approximately 26.5%. This is higher than either boundary rate (19% or 25%) and creates an important planning implication: reducing profit within this band through deductions such as director pension contributions saves approximately 26.5p per pound of reduction, making such contributions particularly efficient for companies with profits regularly in the £50,000–£250,000 range.
Director salary is a company expense and reduces taxable profit before the corporation tax rate is applied. A director salary of £12,570 plus the associated employer NI of approximately £1,139 reduces taxable profit by £13,709. For a company with £65,000 in profit before salary, this brings taxable profit to £51,291 — still in the marginal relief band, but only just. An additional pension contribution could push it below £50,000 into the small profits rate entirely.
Company pension contributions are deducted from profit before corporation tax in the same way as salary. The key difference is that pension contributions do not attract employer or employee NI. A £10,000 company pension contribution saves between £1,900 (at the small profits rate) and £2,650 (at the marginal rate) in corporation tax, with no NI cost attached.
The interplay between salary, pension and the applicable corporation tax rate makes it worth modelling the full picture before finalising year-end decisions. Reducing profit from within the marginal relief band to below £50,000 produces a disproportionately large corporation tax saving relative to the amount contributed or deducted.
The £50,000 and £250,000 thresholds apply to a standalone company with a single active related company at most. Where a director controls or is closely connected with other companies — including family companies where a relative controls another company — the thresholds are divided equally between all associated companies.
A director with two associated companies has effective thresholds of £25,000 and £125,000 rather than £50,000 and £250,000. Three associated companies reduce the thresholds to approximately £16,667 and £83,333. This can dramatically change the effective corporation tax rate and is frequently overlooked by directors who set up multiple companies without considering the associated company implications.
HMRC's guidance on associated companies is detailed and covers control tests, attribution rules and close connections. This calculator applies the standard single-company thresholds and does not automatically adjust for associated companies. If you have related companies, verify your correct thresholds with an accountant before using the standard rate outputs as a planning basis.
One of the most significant planning features of a limited company is the ability to retain post-corporation-tax profit within the company rather than extracting it all personally. Retained profit has already paid corporation tax at 19–25%. If the director extracts it later — as dividends in a year when they are in a lower personal band — the total combined tax can be lower than extracting at higher-rate dividend rates now.
For a company with profits consistently above £250,000 paying 25% corporation tax, retention still defers personal income tax. For a company in the small profits band (19%), retention is an efficient first step — the company pays 19% and the director can choose when and how to extract the remainder. This flexibility is not available to sole traders, who pay income tax on all profit in the year it is earned.
The retained profit calculator on this site shows how much cash remains in the company after salary, employer NI, pension and chosen dividends. Modelling different extraction levels helps identify the optimal balance between current personal income and future retained-profit flexibility.
19% on taxable profits up to £50,000. Above £50,000, marginal relief applies gradually up to £250,000, where the full 25% main rate takes over. The small profits rate is only available to standalone companies or those with very limited associations.
No. Dividends are paid from post-corporation-tax profit. The company pays corporation tax on its profits, and dividends are then distributed from what remains. They are not a tax-deductible expense of the company.
The marginal relief formula produces a marginal rate of 26.5% on the last pound of profit within the £50,000–£250,000 band. This is because the formula reduces tax more steeply at lower profit levels within the band, creating a higher marginal rate at the top of the range. It is counterintuitive but mathematically consistent with the overall smooth transition from 19% to 25%.
Association is determined by control — broadly, companies where the same person or connected persons own more than 50% of the shares or have control. This includes family members in some circumstances. If you are unsure, ask your accountant before relying on the standard thresholds in this calculator.
The limited company tax calculator turns this guidance into a concrete estimate for corporation tax, dividends and personal take-home, based on 2026/27 HMRC rates.