UK corporation tax is not a single flat rate. For 2026/27, small companies with profits up to £50,000 pay 19%, while larger companies above £250,000 pay 25%. Between those thresholds, marginal relief produces an effective rate that rises gradually from 19% to 25%. Where your company sits changes both the tax bill and the right extraction strategy.
Updated 2026/27 · LimitedCompanyTaxCalculator.co.uk · Editorial standards · Methodology
The small profits rate of 19% applies to companies with taxable profits at or below £50,000. The main rate of 25% applies at or above £250,000. These thresholds apply to total taxable profit for the accounting period, not turnover.
At exactly £50,000 taxable profit, the corporation tax bill is £9,500 (19% × £50,000). At £250,000, it is £62,500 (25% × £250,000). The difference in effective rate matters for planning, especially around the £50,000 boundary where small changes in profit can shift the rate band.
Taxable profit is profit after allowable deductions: director salary, employer NI and company pension contributions. These reduce taxable profit before the corporation tax rate is applied.
Companies with profits between £50,000 and £250,000 fall into marginal relief, which produces an effective rate between 19% and 25%. The formula is: corporation tax = (profits × 25%) − ((£250,000 − profits) × 3/200).
The 3/200 fraction means the effective rate increases gradually for each extra pound of profit rather than jumping from 19% to 25% all at once. At £150,000 profit the effective rate is approximately 21.5%. At £200,000 it is approximately 23%.
The marginal relief band also creates a marginal rate of approximately 26.5% on the last pound of profit within it. A pension contribution that reduces profit inside this band saves more corporation tax per pound than at either the small profits or main rate.
Director salary is a company expense and reduces taxable profit before corporation tax. A salary of £12,570 reduces taxable profit by £12,570 before the tax rate is applied.
But if salary exceeds £5,000 (the employer NI secondary threshold for 2026/27), employer NI at 15% applies on the excess. A salary of £12,570 creates employer NI of approximately £1,139 (15% × (£12,570 − £5,000)). That employer NI is itself a company expense and also reduces taxable profit.
Net effect: a £12,570 director salary reduces company profit by approximately £13,709 (salary plus employer NI), saving £2,605 in corporation tax at the 19% rate. Against this, you pay income tax and employee NI on the salary personally. The benefit of the salary depends on the interplay between those layers.
Dividends are not a company expense. They come out of post-corporation-tax profit and do not reduce the corporation tax bill. This is the fundamental difference from salary.
Personal expenses of the director that are not wholly and exclusively for business are not allowable. Client entertainment is generally not deductible. Fines, penalties and amounts not incurred for business purposes are excluded.
Capital expenditure is not deducted as a normal expense, but capital allowances, particularly the Annual Investment Allowance (AIA), can provide a deduction for qualifying equipment and asset purchases. The AIA allows businesses to deduct the full cost of qualifying assets up to £1 million in the year of purchase.
Where a company is associated with one or more other companies under common control, the £50,000 and £250,000 thresholds are divided equally between them. Two associated companies means effective thresholds of £25,000 and £125,000 rather than £50,000 and £250,000.
This can significantly change the effective corporation tax rate. The calculator uses the standard single-company thresholds. If you have associated companies, verify your position with an accountant before treating these outputs as a planning basis.
19% on profits up to £50,000. 25% on profits above £250,000. Marginal relief applies between £50,000 and £250,000, producing an effective rate between 19% and 25%.
Marginal relief prevents a sudden jump from 19% to 25% as profit crosses £50,000. It produces an effective rate that rises gradually from 19% to 25% as profit moves from £50,000 to £250,000. The marginal rate within the band is approximately 26.5%.
No. Dividends come from post-corporation-tax profit. The company pays corporation tax on profits first and distributes dividends from what remains.
Yes. Where a company is associated with other companies under common control, the £50,000 and £250,000 thresholds are divided equally between them. This calculator does not apply associated company adjustments.
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.