UK Corporation Tax Rates: Complete Guide
Understanding UK corporation tax rates is essential for every limited company director. The current system has two main rates — 19% for smaller companies and 25% for larger ones — with marginal relief smoothing the transition between them.
This guide explains how the rates work, which rate applies to your company, and how to calculate your Corporation Tax liability.
Current Corporation Tax Rates
Since April 2023, the UK has operated a two-tier Corporation Tax system:
| Profit Level | Tax Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 - £250,000 | 19-25% (marginal relief applies) |
| Over £250,000 | 25% (main rate) |
Small Profits Rate (19%)
If your company's taxable profits are £50,000 or less, you pay Corporation Tax at the small profits rate of 19%.
Example: Small Profits Calculation
- Taxable profits: £40,000
- Corporation Tax rate: 19%
- Tax due: £40,000 × 19% = £7,600
Main Rate (25%)
If your company's taxable profits exceed £250,000, you pay Corporation Tax at the main rate of 25% on all profits.
Example: Main Rate Calculation
- Taxable profits: £300,000
- Corporation Tax rate: 25%
- Tax due: £300,000 × 25% = £75,000
Marginal Relief (19-25%)
Companies with profits between £50,000 and £250,000 qualify for marginal relief. This tapers the effective tax rate from 19% to 25%, preventing a sudden jump when profits exceed £50,000.
How Marginal Relief Works
Marginal relief uses a formula to calculate a deduction from the main rate tax:
``` Marginal Relief = (Upper Limit - Profits) × Profits/Profits × Standard Fraction ```
The standard fraction is 3/200 (or 0.015).
In simpler terms: for every £1 of profit above £50,000, your effective rate increases slightly until it reaches 25% at £250,000.
Example: Marginal Relief Calculation
- Taxable profits: £100,000
- Tax at main rate: £100,000 × 25% = £25,000
- Marginal relief: (£250,000 - £100,000) × 3/200 = £2,250
- Tax due: £25,000 - £2,250 = £22,750
- Effective rate: 22.75%
Effective Tax Rates by Profit Level
| Profits | Effective Rate |
|---|---|
| £50,000 | 19.00% |
| £75,000 | 20.50% |
| £100,000 | 22.00% |
| £150,000 | 23.50% |
| £200,000 | 24.25% |
| £250,000 | 25.00% |
Associated Companies Rule
The profit thresholds are divided by the number of associated companies you control. This prevents tax avoidance by splitting profits across multiple companies.
What Counts as an Associated Company?
Two companies are associated if:
- One controls the other, OR
- Both are controlled by the same person or group of persons
Example: Two Associated Companies
If you control two associated companies:
- Upper threshold: £250,000 ÷ 2 = £125,000 per company
- Lower threshold: £50,000 ÷ 2 = £25,000 per company
Dormant Companies
Dormant companies don't count as associated companies for threshold purposes — they're excluded from the calculation.
Accounting Periods Straddling Rate Changes
If your accounting period spans a Corporation Tax rate change (e.g., the April 2023 change from 19% flat rate), your profits are apportioned between the two periods, and each portion is taxed at the relevant rate.
This is unusual now but was common when the 25% rate was introduced.
Ring-Fenced Profits
Certain profits are "ring-fenced" and taxed at different rates:
- Oil and gas extraction: 30% ring fence Corporation Tax plus 10% supplementary charge
- Banking surcharge: Additional 8% on banking profits over £100 million
Corporation Tax vs Personal Tax
Corporation Tax rates are often lower than personal income tax rates, which is one reason people incorporate:
| Tax Type | Rate |
|---|---|
| Corporation Tax (small profits) | 19% |
| Corporation Tax (main rate) | 25% |
| Income Tax (basic rate) | 20% |
| Income Tax (higher rate) | 40% |
| Income Tax (additional rate) | 45% |
When Corporation Tax Is Due
The payment deadline for Corporation Tax is 9 months and 1 day after your accounting period ends. This is separate from the CT600 filing deadline (12 months).
Large Company Instalments
Companies with profits over £1.5 million must pay Corporation Tax in quarterly instalments during the accounting period, rather than 9 months after it ends.
Learn more in our CT600 deadlines guide.
Frequently Asked Questions
Has Corporation Tax gone up?
Yes. Before April 2023, all companies paid a flat 19% rate. The 25% main rate was introduced in April 2023 for companies with profits over £250,000.
What's the Corporation Tax rate for small companies?
Small companies with profits under £50,000 pay 19% (the small profits rate). Companies with profits between £50,000 and £250,000 pay an effective rate between 19% and 25% due to marginal relief.
How do I know which rate applies to my company?
Check your taxable profits for the accounting period. If under £50,000, you pay 19%. If over £250,000, you pay 25%. In between, marginal relief applies. Remember to adjust thresholds if you have associated companies.
Is Corporation Tax calculated automatically?
When you file your CT600 with TinyTax, Corporation Tax is calculated automatically based on your profits, including marginal relief where applicable. You don't need to apply the formulas manually.
Can I reduce my Corporation Tax bill?
Yes. Legitimate ways to reduce Corporation Tax include:
- Claiming all allowable business expenses
- Maximising capital allowances on equipment
- Making pension contributions
- Claiming R&D tax credits if eligible
- Carrying forward losses from previous years
Calculate Your Corporation Tax with TinyTax
TinyTax calculates your Corporation Tax automatically, including marginal relief for profits between £50,000 and £250,000. Enter your financial figures and see your tax liability instantly.