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.
Written by James Whitfield · Updated August 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
A company with £100,000 of taxable profit pays £22,750 in corporation tax for 2026/27 - an effective rate of 22.75%, because marginal relief applies between £50,000 and £250,000.
The maths: £100,000 x 25% = £25,000, minus marginal relief of 3/200 x (£250,000 - £100,000) = £2,250, giving £22,750. Pay a director salary first and the taxable profit - and the bill - drop.
Between £50,000 and £250,000, HMRC works out the main-rate tax and then subtracts marginal relief. The formula is: tax = (profit x 25%) - (3/200 x (£250,000 - profit)).
| Profit x 25%£100,000 x 25% | £25,000 |
| Less marginal relief3/200 x (£250,000 - £100,000) = 3/200 x £150,000 | -£2,250 |
| Corporation tax due | £22,750 (22.75%) |
So a company on £100,000 pays £22,750, not the flat £25,000 the headline main rate implies. The relief tapers away as profit approaches £250,000, which is exactly why the rate on each extra pound in the band works out at roughly 26.5%.
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) = £1,135.50. Total company deduction for salary plus employer NI: £13,705.50. Taxable profit after salary: £100,000 − £13,705.50 = £86,294.50. Corporation tax at marginal relief on £86,294.50: (£86,294.50 × 25%) − (3/200 × (£250,000 − £86,294.50)) = £21,573.63 − £2,455.58 = £19,118.04. Effective rate on £86,294.50: about 22.2%.
The corporation tax saving from the salary: £22,750 (pre-salary) minus £19,118.04 (post-salary) = £3,631.96. That is 26.5%, the marginal rate in this band, on the £13,705.50 deducted. The saving exceeds the £1,135.50 employer NI cost by £2,496.46, 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 £86,294.50 with corporation tax of £19,118.04), the company makes a £20,000 pension contribution. New taxable profit: £86,294.50 − £20,000 = £66,294.50. Corporation tax at marginal relief on £66,294.50: (£66,294.50 × 25%) − (3/200 × (£250,000 − £66,294.50)) = £16,573.63 − £2,755.58 = £13,818.04. Effective rate: about 20.8%.
Corporation tax saving from the pension contribution: £19,118.04 (before pension) minus £13,818.04 (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 £66,294.50, corporation tax £13,818.04. Post-tax company profit available for dividends: £66,294.50 − £13,818.04 = £52,476.46.
The director has already received £12,570 salary (covered by personal allowance, no income tax, no NI). The remaining £52,476.46 can be distributed as dividends or retained in the company. If the director takes it all as dividends: total personal income = £12,570 + £52,476.46 = £65,046.46. This pushes dividends into the higher rate band above £50,270. Higher-rate dividend tax: (£65,046.46 − £50,270) = £14,776.46 × 35.75% = £5,282.58. Basic-rate dividend tax: £37,200 at 10.75% = £3,999 (the £500 allowance uses the rest of the band). Total dividend tax: £9,281.58.
If instead the director takes £37,700 in dividends (filling the basic rate band): total personal income = £50,270. Dividend tax: £500 allowance, then £37,200 at 10.75% = £3,999. Personal take-home: £12,570 + £37,700 − £3,999 = £46,271. Company retains £52,476.46 − £37,700 = £14,776.46 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 £86,294.50 and the corporation tax falls to £19,118.04.
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, £67,176.46 in dividends (£86,294.50 taxable profit minus £19,118.04 corporation tax; the salary and employer NI are already deducted). Taking it all as dividends with a £12,570 salary gives total personal income of £79,746.46 and dividend tax of £14,536.83.
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 rates and rules on this page are drawn from the official UK government sources below, using the confirmed 2026/27 figures. Each link opens the relevant HMRC, GOV.UK or Companies House page in a new tab.
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.