Corporation tax rates and marginal relief explained
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.
Written by James Whitfield · Last reviewed 4 November 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
- Two headline rates: 19% up to £50,000 profit and 25% above £250,000.1
- Marginal relief bridges the two, giving a smooth effective rate and a ~26.5% marginal rate.2
- £100,000 profit = £22,750 corporation tax (22.75% effective).1
- Associated companies share the £50k/£250k thresholds, pushing the higher rate in sooner.1
For 2026/27, corporation tax is 19% on taxable profits up to £50,000 and 25% above £250,000. Between those figures, marginal relief produces an effective rate that rises gradually from 19% towards 25%.
The rate applies to profit after deductions like salary, employer NI and pension contributions - so those choices can move a company between bands.
- ·Small profits rate: 19% up to £50,000
- ·Main rate: 25% above £250,000
- ·Marginal band: £50,000-£250,000 (~26.5% marginal)
- ·£100,000 profit -> £22,750 tax
Key figures
- Corporation Tax is 19% on profits up to £50,000 and 25% from £250,000, for the financial years from 1 April 2026 and 1 April 2027. Budget 2026 Annex A
- Between those limits marginal relief applies, with a standard fraction of 3/200 in the financial years 2026 and 2027. Budget 2026 Annex A
- Corporation Tax is due 9 months and 1 day after the end of the accounting period if taxable profits are up to £1.5 million. GOV.UK
Checked 30 October 2026.
Contents ▾
- 1. Worked example: corporation tax at each profit level
- 2. The two main rates for 2026/27
- 3. Marginal relief: what it is and how it works
- 4. How director salary affects the corporation tax bill
- 5. What does not count as an allowable deduction
- 6. Associated companies and the thresholds
- 7. Effective rate or marginal rate: which one to use
Worked example: corporation tax at each profit level
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 two main rates for 2026/27
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 £250,000.1 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.
Marginal relief: what it is and how it works
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 £75,000 profit the effective rate is 21.5%, at £150,000 it is 24%, and at £200,000 it is about 24.6%.
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.
How director salary affects the corporation tax bill
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 £1,135.50 (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 £13,705.50 (salary plus employer NI), saving £2,604.05 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.
What does not count as an allowable deduction
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.
Associated companies and the thresholds
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.
Effective rate or marginal rate: which one to use
Two different rates describe the same bill, and they answer different questions. The effective rate is the bill divided by the profit: use it to describe what the company pays overall. The marginal rate is the tax on the next pound of profit: use it for decisions, such as whether to buy equipment, pay a pension contribution or raise a salary before the year end.
Inside the marginal relief band the two are far apart, because relief is being withdrawn as profit rises:
| £60,000 taxable profitthe next £1,000 costs £265 (26.5%) | 20.25% effective |
| £100,000 taxable profitthe next £1,000 costs £265 (26.5%) | 22.75% effective |
| £150,000 taxable profitthe next £1,000 costs £265 (26.5%) | 24.00% effective |
| £200,000 taxable profitthe next £1,000 costs £265 (26.5%) | 24.62% effective |
So a £1,000 pension contribution or equipment purchase saves £265 of Corporation Tax anywhere between £50,000 and £250,000 of profit, more than at either the 19% or 25% end. For the rates themselves and how the bill is paid, see the 2026/27 Corporation Tax guide.
Frequently asked questions
What is the corporation tax rate for 2026/27?+
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%.
What is marginal relief?+
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%.
Does corporation tax apply to dividends?+
No. Dividends come from post-corporation-tax profit. The company pays corporation tax on profits first and distributes dividends from what remains.
Do associated companies affect the thresholds?+
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.
Where these figures come from
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.
- Corporation Tax rates and reliefs www.gov.uk/corporation-tax-rates
- Marginal Relief for Corporation Tax calculator www.gov.uk/marginal-relief-calculator
- Pay your Corporation Tax bill www.gov.uk/pay-corporation-tax
Estimate your limited company tax
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.