UK corporation tax rates for the financial year starting 1 April 2026 are unchanged from the three previous years. The main rate is 25% on profits over £250,000, and the small profits rate is 19% on profits of £50,000 or less. Between the two limits, marginal relief tapers the bill, giving an effective marginal rate of 26.5% on profits in that band. The limits are divided by the number of associated companies plus one, and cut proportionately for short accounting periods. Finance Act 2026 has already fixed the same rates for the year from 1 April 2027.
Corporation tax rates by financial year
Corporation tax rates are set for "financial years" running from 1 April to 31 March, not for tax years. The current position:
| Financial year | Small profits rate | Main rate | Lower limit | Upper limit | Marginal relief fraction |
|---|---|---|---|---|---|
| FY2023 (from 1 April 2023) | 19% | 25% | £50,000 | £250,000 | 3/200 |
| FY2024 | 19% | 25% | £50,000 | £250,000 | 3/200 |
| FY2025 | 19% | 25% | £50,000 | £250,000 | 3/200 |
| FY2026 (1 April 2026 – 31 March 2027) | 19% | 25% | £50,000 | £250,000 | 3/200 |
| FY2027 (from 1 April 2027, already legislated) | 19% | 25% | £50,000 | £250,000 | 3/200 |
Finance Act 2025 (sections 13 and 14) set the FY2026 rates, and Finance Act 2026 (sections 11 and 12) set FY2027. The figures match HMRC's corporation tax rates and allowances page. Before 1 April 2023 a single rate applied to all companies, whatever their profits. If you searched for the 2025 rates, they are identical: 19% and 25%, with the same limits.
The small profits rate and marginal relief are only available to UK-resident companies that are not close investment-holding companies. A close investment-holding company pays 25% on all its profits, however small. Oil and gas ring fence profits have their own rates.
How marginal relief works
A company whose profits fall between the lower and upper limits first calculates tax at the 25% main rate, then deducts marginal relief. The formula in section 18B of the Corporation Tax Act 2010 is:
Marginal relief = 3/200 × (upper limit − augmented profits) × (taxable profits ÷ augmented profits)
"Augmented profits" are taxable total profits plus exempt dividends of a qualifying kind received from companies outside the group. For most small companies with no such dividends, augmented profits equal taxable profits, and the last fraction drops out. The limits themselves are tested against augmented profits. A company with modest taxable profits can therefore lose the 19% rate entirely if it also receives substantial dividends from companies outside its group.
The effect is that each pound of profit between £50,000 and £250,000 bears 26.5%: the 25% main rate plus 1.5% (3/200) as the relief withdraws. The average rate climbs smoothly from 19% at £50,000 to 25% at £250,000.
Worked examples. These are our illustrations, for a 12-month period with no associated companies:
| Taxable profits | Tax at 25% | Marginal relief | Corporation tax | Effective rate |
|---|---|---|---|---|
| £50,000 | — | — | £9,500 (at 19%) | 19.0% |
| £75,000 | £18,750 | £2,625 | £16,125 | 21.5% |
| £100,000 | £25,000 | £2,250 | £22,750 | 22.75% |
| £150,000 | £37,500 | £1,500 | £36,000 | 24.0% |
| £250,000 | £62,500 | £0 | £62,500 | 25.0% |
Where a company also receives exempt dividends, both parts of the formula matter. HMRC's own manual example uses taxable profits of £90,000 and augmented profits of £98,000. Marginal relief is 3/200 × (£250,000 − £98,000) × (£90,000 ÷ £98,000) = £2,094, leaving corporation tax of £20,406.
Associated companies
The limits are shared between associated companies. Divide £50,000 and £250,000 by the number of associated companies plus one. A company with one associated company therefore has limits of £25,000 and £125,000. With three associated companies, the limits are divided by four, to £12,500 and £62,500. As an illustration, a company with one associated company and profits of £100,000 pays £25,000 less marginal relief of 3/200 × (£125,000 − £100,000) = £375, so £24,625. A company with no associated companies would pay £22,750 on the same profits.
Under HMRC's guidance:
- Control is the test. Companies are associated if one controls the other, or both are under the control of the same person or persons, using the close company definition of control;
- Part of the period is enough. A company counts even if it was associated for only part of the accounting period;
- Dormant companies are ignored. An associated company that carried on no trade or business at any time in the period is disregarded.
Family groups, and owners with several companies, often lose more of the 19% band than they expect. Check the associated company count before relying on the small profits rate.
Short accounting periods and periods spanning 1 April
For an accounting period of less than 12 months, the lower and upper limits are reduced proportionately. A six-month period has limits of £25,000 and £125,000, before any division for associated companies. An accounting period can never exceed 12 months for corporation tax, so a 15-month set of accounts is split into a 12-month period and a three-month period, each with its own limits.
Where an accounting period straddles 1 April, the Corporation Tax Act 2009 requires profits to be apportioned between the two financial years. Each part is taxed at that year's rates. While the rates are unchanged from FY2023 to FY2027, this makes no difference to the result.
Planning points
- The 26.5% band is the expensive one. Pension contributions, capital expenditure qualifying for the £1 million annual investment allowance, and other deductible spend save tax at 26.5% in this band, against 19% below it;
- Timing matters at the margins. Accelerating or deferring deductible spend across a year end can move profit in or out of the marginal band;
- Restructuring changes the count. Adding a company under common control reduces every associated company's limits from the period in which it becomes associated.
For the wider rules, see corporation tax explained. For the payment mechanics, see how to pay corporation tax. Acumon's corporation tax advisers calculate marginal relief, review associated company positions and plan the timing of expenditure. Our tax planning team looks at extraction and group structure alongside.