Home / Guides / Corporation Tax on £100,000 Profit 2026/27 | Worked Example
A company with £100,000 in taxable profit sits firmly in the marginal relief band for 2026/27. Neither the 19% small profits rate nor the 25% main rate applies cleanly, instead, the marginal relief formula produces an effective rate of approximately 22.75%. This page works through the calculation in full and shows how director salary and pension contributions change the bill.
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.
For 2026/27, the HMRC marginal relief formula is: Corporation tax = (Profits × 25%) − (3/200 × (£250,000 − Profits)). Applying this to £100,000: Step 1: £100,000 × 25% = £25,000. Step 2: 3/200 × (£250,000 − £100,000) = 3/200 × £150,000 = £2,250. Corporation tax = £25,000 − £2,250 = £22,750. Effective rate: 22.75%.
This effective rate of 22.75% is significantly higher than the 19% small profits rate and materially below the 25% main rate. It is not a rate you pay on specific bands of profit, it is a single blended rate applied to total taxable profit of £100,000.
The marginal rate at this profit level, the rate on the last pound of profit, is approximately 26.5%. This is the rate that matters for planning decisions: every pound of profit reduced through salary, pension or other deductible expenses saves 26.5p in corporation tax when profits are in the £50,000–£250,000 band.
Director salary is deducted from company profit before corporation tax. If the company has £100,000 in profit before salary and the director takes a salary of £12,570, the position changes as follows: Employer NI on the salary: 15% × (£12,570 − £5,000) = £1,139. Total company deduction for salary plus employer NI: £13,709. Taxable profit after salary: £100,000 − £13,709 = £86,291. Corporation tax at marginal relief on £86,291: (£86,291 × 25%) − (3/200 × (£250,000 − £86,291)) = £21,573 − (3/200 × £163,709) = £21,573 − £2,456 = £19,117. Effective rate on £86,291: approximately 22.2%.
The corporation tax saving from the salary: £22,750 (pre-salary) minus £19,117 (post-salary) = £3,633. This saving comes from two sources: the salary deduction reducing profit (saving £3,427 at 25% pre-salary) and the employer NI deduction (saving a further £206 on that £1,139). The total saving of £3,633 exceeds the employer NI cost of £1,139 by £2,494, confirming that a £12,570 director salary is net positive for corporation tax efficiency at this profit level.
The personal tax effect: the director receives £12,570 salary tax-free (within personal allowance) and pays no employee NI (as salary exactly equals the personal allowance). The salary also sets the platform for dividend extraction at lower personal income tax rates.
After taking a £12,570 salary (leaving taxable profit at £86,291 with corporation tax of £19,117), the company makes a £20,000 pension contribution. New taxable profit: £86,291 − £20,000 = £66,291. Corporation tax at marginal relief on £66,291: (£66,291 × 25%) − (3/200 × (£250,000 − £66,291)) = £16,573 − (3/200 × £183,709) = £16,573 − £2,756 = £13,817. Effective rate: approximately 20.8%.
Corporation tax saving from the pension contribution: £19,117 (before pension) minus £13,817 (after pension) = £5,300. This saving of £5,300 on a £20,000 contribution represents a 26.5% effective saving, exactly the marginal rate in the band. There is no employer NI on pension contributions, so the full £5,300 is a net gain from making the pension contribution versus taking the same amount as salary.
The pension contribution also carries no personal income tax implications until retirement. The £20,000 goes into the pension fund, saving £5,300 in corporation tax, with no NI and no immediate personal tax. Compare this with a £20,000 salary: employer NI £2,250, income tax on the portion above personal allowance at 20% or 40%, and employee NI at 8%. The pension route is dramatically more efficient.
Starting from £100,000 company profit, after taking a £12,570 salary and £20,000 pension contribution: taxable profit £66,291, corporation tax £13,817. Post-tax company profit available for dividends: £66,291 − £13,817 = £52,474.
The director has already received £12,570 salary (covered by personal allowance, no income tax, no NI). The remaining £52,474 can be distributed as dividends or retained in the company. If the director takes all £52,474 as dividends: total personal income = £12,570 salary + £52,474 dividends = £65,044. This pushes dividends into the higher rate band above £50,270. Higher-rate dividend tax at 33.75% on (£65,044 − £50,270) = £14,774 × 33.75% = £4,986. Basic-rate dividend tax on £37,200 at 8.75% = £3,255. Total dividend tax: approximately £8,241.
If instead the director only takes £37,200 in dividends (staying within the basic rate band): total personal income = £50,270. Dividend tax: £37,200 at 8.75% = £3,255 (approximately, after £500 allowance = £3,211). Personal take-home: £12,570 + £37,200 − £3,211 = £46,559. Company retains £52,474 − £37,200 = £15,274 after the chosen dividend level. This retained amount has already paid 20.8% corporation tax.
£22,750, at an effective rate of 22.75%. This applies the marginal relief formula: (£100,000 × 25%) − (3/200 × £150,000) = £25,000 − £2,250 = £22,750. With a £12,570 director salary, the taxable profit falls to £86,291 and the corporation tax falls to approximately £19,117.
Yes. The marginal relief band runs from £50,000 to £250,000. A company with £100,000 in taxable profit is firmly within the band and pays an effective corporation tax rate of approximately 22.75%.
After a £12,570 salary and no pension, approximately £65,345 in dividends (based on £86,291 taxable profit minus £19,117 corporation tax, leaving £67,174, the £12,570 salary cost is already deducted from the company). Taking all available profit as dividends with £12,570 salary produces total personal income of approximately £77,915.
Yes, significantly. The marginal corporation tax rate within the £50,000–£250,000 band is approximately 26.5%. Every £1 of pension contribution saves 26.5p in corporation tax, with no employer or employee NI. A £20,000 pension contribution saves approximately £5,300 in corporation tax versus taking the same amount as salary.
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.