Corporation Tax Rates in the UK for 2026/27: A Guide With Worked Examples

If your limited company makes a profit, HMRC takes a share through corporation tax. The UK system has two headline rates with a tapered band between them, and that taper confuses almost every small-business owner the first time they meet it. This guide explains the 2026/27 rates in plain English, then walks through fully worked calculations at £80,000, £150,000 and £300,000 profit so you can see exactly how the maths works. You will also learn about the associated-companies rule that can quietly shrink your tax thresholds, plus payment deadlines and the mistakes that trigger penalties.

In short: As of the 2026/27 financial year, UK companies pay 19% corporation tax on profits up to £50,000 (the small profits rate) and 25% on profits above £250,000 (the main rate). Profits between £50,000 and £250,000 fall in the marginal relief band. HMRC charges 25% first, then deducts a tapered rebate calculated as 3/200 × (£250,000 − profit), giving an effective rate between 19% and 25%.

All rates and thresholds below are stated as of the 2026/27 financial year (1 April 2026 to 31 March 2027). Tax rules change, so verify current figures on gov.uk or with HMRC before you file.

What are the UK corporation tax rates for 2026/27?

The structure has three parts. Once you see them side by side, the system is straightforward.

A few points worth pinning down before we do the maths:

• These are rates on taxable profit, not turnover. Taxable profit is your accounting profit adjusted for tax rules, for example after capital allowances on equipment and after adding back disallowable expenses such as client entertaining.
• The £50,000 and £250,000 thresholds apply to a standalone company with no associated companies and a 12-month accounting period. Both can shrink, which the associated-companies section below explains.
• The financial year for corporation tax runs from 1 April to 31 March. The 2026/27 financial year is 1 April 2026 to 31 March 2027.

How does marginal relief actually work?

Marginal relief stops the tax bill from jumping the moment profit passes £50,000. Instead of a cliff edge, the effective rate glides from 19% to 25% across the band. HMRC’s method has three steps:

1. Charge 25% on the whole profit. Yes, even if only part of the profit is above £50,000.
2. Calculate the relief: 3/200 × (upper limit − profit). For a standalone company, the upper limit is £250,000. The fraction 3/200 equals 0.015.
3. Subtract the relief from the 25% charge. What remains is the corporation tax you owe.

Put as a formula:

Corporation tax = (profit × 25%) − (3/200 × (£250,000 − profit))

The relief is biggest at the bottom of the band and shrinks to zero at the top. At £50,000 profit the relief pulls the bill back to exactly 19%. At £250,000 the relief is zero and you pay the full 25%.

One technical note: if your company receives dividends from other companies (franked investment income), HMRC adds those to your profit to give augmented profits, which decide which band you fall into. The tax itself is still charged only on your own taxable profit. Most small companies never meet this, but it matters for holding structures.

Worked example 1: £80,000 profit

A company with £80,000 of taxable profit and no associated companies sits inside the marginal relief band. Here is the full calculation:

Corporation tax due: £17,450. The effective rate is £17,450 ÷ £80,000 = 21.8%.

Notice the shape of it. The company pays more than the 19% small profits rate but well below the 25% main rate, because £80,000 sits in the lower third of the band. If the same company had made £50,000, it would have paid 19% (£9,500). The extra £30,000 of profit cost £7,950 in tax.

Worked example 2: £150,000 profit

At £150,000, the company is past the midpoint of the marginal relief band, so the relief is smaller and the effective rate is closer to 25%.

Corporation tax due: £36,000. The effective rate is £36,000 ÷ £150,000 = 24%.

Compare the two examples. Profit rose by £70,000 (from £80,000 to £150,000) and the tax bill rose by £18,550. That is an average of 26.5% on the extra profit, which is not a coincidence. The next section explains why.

Worked example 3: £300,000 profit

At £300,000 the company is above the £250,000 upper limit, so marginal relief does not apply at all. The calculation is a single line:

Corporation tax due: £75,000. The effective rate is exactly 25%.

The same flat 25% applies to any profit above £250,000, whether it is £260,000 or £2.6 million. The only thing that changes at very high profit levels is how you pay (quarterly instalments, covered in the payment section).

Effective rates at a glance

To make the taper visible, here is what the effective rate looks like at several profit points for a standalone company:

The curve is smooth. There is no profit level where earning £1 more suddenly costs you thousands in extra tax.

The 26.5% rate nobody talks about

Here is the detail most guides skip. Inside the marginal relief band, each extra pound of profit is effectively taxed at 26.5%, which is higher than both headline rates.

Why? Because as profit rises, two things happen at once: the new pound is charged at 25%, and the marginal relief on all the profit below it shrinks slightly. The combined effect is 26.5p of tax per extra £1 of profit anywhere between £50,000 and £250,000.

This matters for decisions, not just for filing:

• Timing income and expenses. If a £10,000 invoice can legitimately fall in this accounting period or the next, and your profit sits inside the band, the tax difference on that £10,000 is £2,650, not £1,900 or £2,500.
• Director bonuses and pension contributions. A £5,000 employer pension contribution made before the year end saves £1,325 of corporation tax if you are in the band, versus £950 at the small profits rate. Pension contributions are usually an allowable business expense.
• Quoting and pricing. When you model the after-tax return on a new contract, 26.5% is the right marginal figure to use inside the band, not 19% or 25%.

Your average (effective) rate stays between 19% and 25%. It is only the marginal rate, the rate on the next pound, that hits 26.5%. Keep the two ideas separate and the band stops being mysterious.

The associated-companies trap: when your thresholds shrink

This is the rule that catches experienced owners out. The £50,000 and £250,000 limits are not per person or per group. They are divided by the number of associated companies, including the company itself.

Two companies under the same control means each company gets limits of £25,000 and £125,000. Three companies means £16,667 and £83,333 each. The 25% main rate arrives at a fraction of the profit you expected.

What counts as an associated company?

Broadly, a company is associated with yours if it is under the same control. In practice this catches:

• Two or more trading companies owned by the same person or the same group.
• A dormant company you set up years ago and forgot about. Dormant companies can still count.
• Companies controlled by close family members in some situations.
• Overseas companies under your control. The test is worldwide.

There are detailed exceptions (for example, certain passive holding companies), so this is one area where an accountant earns their fee. But the default assumption should be: if you control more than one company, your thresholds are probably divided.

Worked example: the trap in numbers

Take the £80,000-profit company from Example 1. On its own it paid £17,450 (21.8%). Now suppose the owner also controls one other company, so the two companies are associated.

The second company added £1,875 to the tax bill on the exact same £80,000 profit. And if the profit had been £130,000, the company would have been above its £125,000 upper limit and paid the full 25% with no relief at all.

HMRC wrote to companies about the associated-companies rules during 2026, which tells you how seriously they take underpayments here. If you run more than one company, check your position before you file, not after.

How your accounting period affects the rates

Corporation tax rates apply by financial year (1 April to 31 March), not by your company’s accounting period. Two consequences follow:

1. Straddling two financial years. If your accounting period runs, say, 1 July 2026 to 30 June 2027, it falls across FY2026 (1 April 2026 to 31 March 2027) and FY2027 (1 April 2027 to 31 March 2028). You apportion the profit between the two years on a time basis and apply each year’s rates. As of 2026/27 the rates are unchanged from the prior year, so this is currently a paperwork exercise, but it matters whenever rates change.
2. Short accounting periods. If your accounting period is shorter than 12 months, perhaps your first period after incorporation, the £50,000 and £250,000 limits are pro-rated. A 6-month period gets limits of £25,000 and £125,000. A 9-month period gets £37,500 and £187,500. Forgetting this is a classic first-year mistake.

When and how to pay corporation tax

Knowing the bill is half the battle. Paying it on time is the other half.

So a company with a 31 March 2027 year end must pay by 1 January 2028 and file its return by 31 March 2028. The payment deadline comes first, which surprises first-time directors who assume filing and paying happen together.

A few practical points:

• How to pay. Most companies pay through their HMRC online business tax account by bank transfer, or their accountant pays via software. Keep the payment reference exact, or the money can sit unallocated while interest accrues.
• Large companies pay differently. If profits exceed £1.5 million, corporation tax is normally paid in quarterly instalments during the accounting period itself, not 9 months afterwards. Very large companies (profits above £20 million, divided among group members) pay even earlier. Verify the current instalment thresholds on gov.uk.
• Losses. If the company made a loss, there is no corporation tax to pay. Losses can usually be carried forward against future profits or, in some cases, carried back against the previous year’s profit for a repayment.
• Penalties. Filing the CT600 late brings an automatic £100 penalty, rising with further delay, and HMRC charges interest on tax paid late. Set calendar reminders for both deadlines the day your year end passes.

Five common mistakes that cost companies money

1. Forgetting associated companies. The single most expensive oversight on this page. One extra company under your control can halve your thresholds. Review your group structure every year.
2. Using turnover instead of profit. Corporation tax is charged on taxable profit after allowable deductions, not on sales. Claiming every legitimate expense, from software subscriptions to accountancy fees, directly reduces the bill.
3. Missing the payment deadline. The 9-months-and-1-day payment date falls three months before the CT600 filing deadline. Diarise them separately.
4. Ignoring short-period pro-rating. First accounting periods are often shorter than 12 months, which shrinks the £50,000 and £250,000 limits. New companies get this wrong more than any other group.
5. Confusing dividends received with extra tax. Dividends your company receives from other companies are generally exempt from corporation tax (they are franked investment income), but they still feed into augmented profits and can push you into a higher band. Know the difference between “which band am I in” and “what am I taxed on”.

Legal ways to reduce your corporation tax bill

Everything here is standard, HMRC-recognised planning. None of it requires exotic structures.

• Claim capital allowances. Equipment, vans, machinery and office fit-outs usually qualify for the Annual Investment Allowance, giving 100% relief in the year of purchase. A £15,000 equipment purchase saves £2,850 of tax at the 19% rate or £3,975 inside the marginal band.
• Pay employer pension contributions. Contributions your company makes to your pension are normally an allowable expense with no employer National Insurance, unlike salary. Inside the marginal band each £1,000 contributed saves £265 of corporation tax.
• Use R&D tax relief if you innovate. The merged R&D scheme gives enhanced deductions for qualifying research and development. Software development, engineering and product design often qualify.
• Time major spending. Bringing a planned purchase forward into the current period, or deferring income by a few weeks where legitimate, can keep you in a lower effective rate.
• Keep immaculate records. You cannot claim what you cannot evidence. Cloud bookkeeping with receipts attached to every transaction makes every legitimate deduction defensible.

For a wider planning framework, including salary-versus-dividend extraction and year-end checklists, see our tax planning strategies for small business owners.

Corporation tax FAQs

What is the UK corporation tax rate for 2026/27?

As of the 2026/27 financial year, the small profits rate is 19% on profits up to £50,000 and the main rate is 25% on profits above £250,000. Profits between the two limits get marginal relief, producing an effective rate between 19% and 25%. Verify current rates on gov.uk, as they can change.

How do I calculate corporation tax on £100,000 profit?

Charge 25% (£25,000), then subtract marginal relief of 3/200 × (£250,000 − £100,000) = £2,250. The bill is £22,750, an effective rate of 22.75%. This assumes a standalone company with a 12-month accounting period.

What is marginal relief in simple terms?

It is HMRC’s taper that stops your tax bill jumping when profit passes £50,000. You are charged 25% on the whole profit, then given a rebate that is largest at £50,000 and shrinks to zero at £250,000. The rebate formula is 3/200 × (upper limit − profit).

Why is the marginal rate 26.5% when the headline rates are 19% and 25%?

Because inside the band, each extra £1 of profit is taxed at 25% and slightly reduces the relief on the profit below it. The combined effect is 26.5p per £1. Your average rate still sits between 19% and 25%; 26.5% is the rate on the next pound only.

What are associated companies for corporation tax?

Companies under common control. The £50,000 and £250,000 thresholds are divided by the total number of associated companies including your own, so two associated companies means limits of £25,000 and £125,000 each. The test is worldwide and can catch dormant companies.

When must I pay my company’s corporation tax?

Nine months and one day after the end of the accounting period. For a 31 March 2027 year end, payment is due by 1 January 2028. The CT600 return itself is due 12 months after the period end. Large companies (profits above £1.5 million) normally pay in quarterly instalments instead.

Do I pay corporation tax if my company made a loss?

No. There is no corporation tax on a loss. You can usually carry the loss forward to set against future profits, or in some cases carry it back against the previous year’s profit to reclaim tax already paid.

Does it matter which financial year my accounting period falls in?

Yes. Corporation tax rates apply to financial years running 1 April to 31 March. A period straddling two financial years has its profit apportioned between them, with each slice taxed at that year’s rates. Short periods also get pro-rated thresholds.

Are dividends my company receives taxed?

Dividends received from other companies are generally exempt from corporation tax, but they are added to your profit to calculate augmented profits, which decide your band. They can push you into the marginal band or onto the main rate sooner.

Is the 19% rate only for small companies?

Roughly, but the legal test is profit level and associated companies, not headcount. A company with 200 employees and £40,000 of profit pays 19%. A one-person company with £300,000 of profit pays 25%.

What happens if I file my CT600 late?

HMRC issues an automatic £100 penalty, with further penalties for longer delays, plus interest on any tax paid late. File even if you cannot pay in full; the filing penalty and the late-payment interest are separate.

How do I actually work out my taxable profit?

Start with your accounting profit, then adjust: add back disallowable spending (client entertaining, fines), deduct capital allowances on qualifying assets, and adjust for items like R&D uplifts or loss relief. If the profit figure itself is unclear, our guide to reading and analysing financial statements walks through where each number lives.

Conclusion

The 2026/27 corporation tax system rewards owners who understand its shape. Below £50,000 you pay 19%. Above £250,000 you pay 25%. Between the two, marginal relief glides the effective rate from one to the other, with each extra pound inside the band costing 26.5p. The traps are the associated-companies rule, which can halve your thresholds without warning, and the payment deadline, which arrives three months before the filing deadline.

Work through your own profit figure with the three-step formula, check whether any associated companies divide your limits, and diarise both deadlines the day your year end passes. Then, once the company’s bill is settled, turn to the next question: how to take the remaining profit out. Our comparison of salary vs dividends for limited company directors works through the take-home maths at £30,000, £50,000 and £100,000.

This guide is general information about UK corporation tax as of the 2026/27 financial year, not tax advice. Rates, thresholds and reliefs can change, so verify current figures on gov.uk or with HMRC, and consider speaking to a qualified accountant before making decisions based on your company’s profits.