Corporation tax is not a single flat rate. Where your company sits, at 19%, somewhere in between, or at 25%, changes both the tax bill and the planning choices around salary, dividends and pension. The marginal relief band between £50,000 and £250,000 creates an effective rate that rises gradually. And the marginal rate at the top of that band is actually higher than the main rate itself.
Written by James Whitfield · Updated August 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
The 2026/27 corporation tax rates are 19% on profits up to £50,000 and 25% above £250,000, with marginal relief smoothing the band in between.
Because the rate applies to profit after salary, employer NI and pension deductions, year-end planning can move a company between bands and is well worth doing before profits are locked in.
The effective rate climbs smoothly from 19% to 25% across the marginal-relief band. These figures are the tax on taxable profit itself, before any salary or pension deduction.
| £50,000 profit19.00% - small profits rate | £9,500 |
| £75,000 profit21.50% | £16,125 |
| £100,000 profit22.75% | £22,750 |
| £150,000 profit24.00% | £36,000 |
| £250,000 profit25.00% - main rate | £62,500 |
| Marginal rate inside the £50k-£250k band | ~26.5% |
That ~26.5% marginal rate is the quiet sting: each extra pound of profit between £50,000 and £250,000 costs more than a pound in the main-rate band would. It is also why a pension contribution or other deduction that pulls profit back through this band is worth more here than anywhere else.
The small profits rate of 19% applies to companies with taxable profits at or below £50,000. The main rate of 25% applies above £250,000. These are not graduated rates applied to profit bands. They are flat rates applied to total taxable profit once the threshold is met. A company with £49,000 pays 19% on all of it. A company with £260,000 pays 25% on all of it.
Taxable profit is profit after all allowable deductions: director salary, employer NI, pension contributions and other business costs. The rates apply to a lower figure than gross revenue. Salary and pension decisions directly affect which rate band the company ends up in.
These thresholds have been in place since April 2023. Before that, a single 19% rate applied to all companies. The dual-rate system and the marginal relief band that came with it are the most significant change to corporation tax in a generation for small business owners.
Between £50,000 and £250,000, neither the 19% nor the 25% rate applies cleanly. Instead, marginal relief produces an effective rate that rises from 19% to 25% as profit increases. The HMRC formula is: corporation tax = (profits × 25%) minus (3/200 × (£250,000 minus profits)).
For a company with £80,000 in taxable profit: £80,000 × 25% = £20,000, minus 3/200 × (£250,000 − £80,000) = 3/200 × £170,000 = £2,550. Corporation tax = £17,450. Effective rate: 21.8%. At £150,000: £150,000 × 25% = £37,500, minus 3/200 × £100,000 = £1,500. Corporation tax = £36,000. Effective rate: 24%. At £200,000: £200,000 × 25% = £50,000, minus 3/200 × £50,000 = £750. Corporation tax = £49,250. Effective rate: 24.6%.
The marginal rate on the last pound of profit within the band is approximately 26.5%, higher than either the 19% or 25% boundary rate. This matters for planning: any deduction that reduces profit within this band saves approximately 26.5p in corporation tax per pound. A company pension contribution or a director salary increase has a higher corporation tax saving rate in this range than at either boundary.
Marginal relief is most relevant for owner-managed companies with profits that sit regularly in the £50,000–£250,000 range. For a company with profits of £100,000, the choice of whether to take a salary of £5,000 or £12,570, or to make a £20,000 company pension contribution, all affect the corporation tax band and effective rate.
The best use of the formula is to model the full picture: start with profit before deductions, subtract the planned salary and employer NI, subtract any pension contribution, and apply the marginal relief formula to the result. This gives the actual corporation tax bill rather than an estimate based on a rounded rate.
For companies whose profits are consistently below £50,000, marginal relief is irrelevant, the small profits rate applies throughout. For companies above £250,000, the main rate applies and marginal relief does not reduce it further. The marginal relief calculation only benefits companies in the band, but for those companies it creates material planning opportunities.
The £50,000 and £250,000 thresholds apply to a single standalone company. Where a company is associated with one or more other companies, broadly, companies where the same person or connected persons have control, the thresholds are divided equally between the associated companies.
A director who controls two companies has effective thresholds of £25,000 and £125,000 for each company. Three associated companies reduce the thresholds to approximately £16,667 and £83,333. This means a company that would otherwise comfortably sit in the small profits band may face marginal relief rates, or even the main rate, once associated company rules are applied.
Association is determined by control and includes certain family relationships. The rules are detailed enough that if you operate through more than one company, or if your spouse or parent controls another company, the associated company position should be verified with an accountant. Using the standard thresholds when association rules apply will produce an incorrect, and usually understated, corporation tax bill.
For a standalone company, the effective rate at £80,000 is approximately 21.8%. The marginal relief formula gives: (£80,000 × 25%) − (3/200 × £170,000) = £20,000 − £2,550 = £17,450 in corporation tax.
The full 25% main rate applies to profits above £250,000. Between £50,000 and £250,000, marginal relief produces a graduated rate between 19% and 25%.
The marginal relief formula reduces the tax charge more steeply at lower profit levels within the band, creating a marginal rate of approximately 26.5% on the last pound of profit. This makes pension contributions and other deductions within the band more tax-efficient than at either boundary rate.
Association is based on control. If you or your connected persons (including close family) control other companies, those companies may be associated. Verify your position with an accountant rather than assuming standalone thresholds apply.
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.