UK Corporation Tax Rates Explained 19 25 and Marginal Relief
Corporation Tax can look simple at first glance. Then the thresholds, associated company rules and Marginal Relief start to matter.
For UK limited companies, the tax due is based on taxable profits, not turnover and not the amount of cash in the bank. A company with £70,000 of sales might have little or no Corporation Tax to pay after costs. A company with lower sales but high margins could have a larger bill.
The main UK Corporation Tax rates are:
19% for eligible companies with taxable profits of £50,000 or less
Marginal Relief for profits between £50,000 and £250,000
25% main rate for profits above £250,000
Those figures are the headline rates. The actual position can change if the company has associated companies, a shorter accounting period, investment income, capital allowances, losses or other tax adjustments.
Corporation Tax is charged on taxable profits
A common mistake is to treat accounting profit and taxable profit as the same thing. They are linked, but they are not always identical.
A company starts with its accounts, then makes tax adjustments. Some costs shown in the accounts may not be allowable for Corporation Tax. Some tax reliefs may reduce the taxable figure. Capital purchases may be treated through capital allowances rather than as normal expenses.
Taxable profits can include:
Trading profits from goods or services
Investment income
Chargeable gains from selling business assets
Other taxable company income
Costs may reduce profits if they are wholly and exclusively for business purposes. Common examples include accountancy fees, software, insurance, rent, wages, employer pension contributions and business travel.
Some items need care. Client entertaining is usually not deductible for Corporation Tax. Fines and penalties are normally not allowable. Dividends paid to shareholders do not reduce Corporation Tax, even though salary paid through payroll usually does.
That is why good bookkeeping matters. If records are incomplete, the Corporation Tax return can be wrong, reliefs can be missed, or the company may pay more tax than needed.
The 19 percent Small Profits Rate
The Small Profits Rate is 19% for eligible companies with taxable profits of £50,000 or less.
For example, if a company has taxable profits of £40,000 and qualifies for the Small Profits Rate, the Corporation Tax would usually be:
Taxable profits | Rate | Corporation Tax |
£40,000 | 19% | £7,600 |
This is a simple example. The real calculation may change if there are associated companies, a short accounting period or other tax adjustments.
The £50,000 lower limit is not always available in full. It can be reduced where the company has associated companies. It can also be reduced if the accounting period is shorter than 12 months.
A company may be associated with another company if one controls the other, or if both are under the control of the same person or people. This can catch group companies, companies owned by the same shareholders, and some family or connected-party structures.
For example, if a company has one associated company, the £50,000 lower limit and £250,000 upper limit are usually divided by two. That means the lower limit could become £25,000 and the upper limit £125,000 for each company.
The 25 percent main rate
The main Corporation Tax rate is 25% for companies with profits above £250,000.
A company with taxable profits of £300,000 would usually fall into the main rate, subject to the same associated company and accounting period rules.
Taxable profits | Rate | Corporation Tax |
£300,000 | 25% | £75,000 |
Again, this is a simplified example. In practice, the company’s CT600 Corporation Tax return may include capital allowances, losses, group relief, research and development claims, chargeable gains, loans to participators or other adjustments.
The 25% rate does not mean every company pays more tax on every pound of profit. The Small Profits Rate and Marginal Relief can reduce the effective rate for companies below the upper threshold.
Marginal Relief applies between the two limits
Marginal Relief applies where taxable profits fall between the lower and upper limits. For a standard 12-month period with no associated companies, that means profits between £50,000 and £250,000.
Marginal Relief reduces the tax bill so that the company does not jump straight from 19% to 25% as soon as profits exceed £50,000.
In simple terms:
Profits up to £50,000 may qualify for 19%
Profits above £250,000 are generally taxed at 25%
Profits between £50,000 and £250,000 receive tapered relief
The effective Corporation Tax rate increases gradually across this band.
A simplified example helps.
Taxable profits | Main rate tax at 25% | Marginal Relief | Corporation Tax due | Effective rate |
£100,000 | £25,000 | £2,250 | £22,750 | 22.75% |
For profits of £100,000, the company does not simply pay 25% on the full amount. Marginal Relief reduces the tax due.
The standard Marginal Relief calculation uses a fraction set by HMRC and takes account of augmented profits. Augmented profits can include taxable total profits plus certain distributions that are not otherwise taxed. For many straightforward trading companies, the calculation may be simple. For others, it needs more care.
The key point is that companies in this middle band should not guess the tax bill by using one flat rate. The difference can be material, especially where profits are close to the thresholds.
Thresholds can be lower than expected
The £50,000 and £250,000 thresholds are often quoted as fixed numbers. For many companies, they are the starting point. They are not always the final limits.
The limits may be reduced where:
The company has associated companies
The accounting period is shorter than 12 months
There are connected companies under common control
Short accounting periods are common when a company starts trading, changes its year end or prepares accounts for a period of less than 12 months.
For example, if a company has a six-month accounting period, the lower and upper limits are usually time-apportioned. The £50,000 lower limit may become £25,000. The £250,000 upper limit may become £125,000.
Associated companies can have an even bigger effect. A business owner with more than one company should check whether the companies are associated for Corporation Tax purposes. The answer is not always the same as whether the companies trade together or share customers.
The control test matters. Shareholdings, voting rights, rights to income and rights on winding up can all be relevant.
This is one reason professional advice can be useful before creating extra companies. A new company might make commercial sense, but it can also reduce tax thresholds for all associated companies.
Good bookkeeping helps prevent wrong tax bills
Corporation Tax planning starts long before the CT600 is filed. It starts with accurate records.
A company should keep clear records of:
Sales invoices and income
Purchase invoices and receipts
Bank transactions
Payroll records
Director loan account movements
Asset purchases
Mileage and travel costs
VAT records, if VAT registered
Good bookkeeping helps directors see profit levels before the year end. That gives time to make proper decisions, rather than discovering the tax position after the accounting period has closed.
For example, if a company is approaching the Marginal Relief band, directors may want to review planned asset purchases, pension contributions, repairs, bad debts or stock levels. These decisions should be commercially sensible and properly evidenced. Tax should not be the only reason for spending money.
Poor records can lead to missed expenses. They can also create problems if HMRC asks questions. A clear audit trail makes it easier to explain the figures in the accounts and the CT600.
Allowable expenses and capital allowances can reduce taxable profits
Allowable expenses reduce taxable profits when they meet the tax rules. The expense must usually be incurred for the company’s trade and supported by records.
Common allowable costs may include:
Accountancy and bookkeeping fees
Business insurance
Software subscriptions
Staff wages and employer National Insurance
Employer pension contributions
Telephone and internet costs with a business element
Rent and utilities for business premises
Training linked to the trade
Advertising and website costs
Repairs and maintenance
Capital assets work differently. A laptop, van, equipment or machinery may not simply be deducted as a normal expense in the same way as stationery. Instead, the company may claim capital allowances.
Capital allowances can be valuable, but the rules depend on the asset, the timing and the type of allowance available. Some cars, for example, receive different treatment depending on emissions. Assets bought close to the year end may affect the tax position for that period.
A year-end review can help identify whether the company has claimed the right reliefs and whether planned purchases should happen before or after the accounting date.
Year-end tax planning should be practical
Year-end planning is not about artificial arrangements. It is about using the rules properly and making sure the company’s accounts reflect the real position.
Useful checks before the year end include:
Reviewing profit forecasts
Checking unpaid supplier invoices
Identifying assets bought during the year
Reviewing director salaries and pension contributions
Checking the director loan account
Considering bad debts
Reviewing stock or work in progress
Checking whether losses can be used
Reviewing associated company status
The timing of income and expenses can matter. So can the timing of dividends, asset purchases and pension contributions.
Dividends need special care. They are paid from post-tax profits and do not reduce Corporation Tax. A company should have enough distributable reserves before declaring dividends, and the paperwork should be correct.
Director loan accounts also need attention. If a director has borrowed money from the company and the balance remains outstanding, extra tax issues can arise. These rules sit alongside the normal Corporation Tax calculation and should be checked before filing.
Filing the CT600 and paying Corporation Tax
Most UK limited companies must file a Company Tax Return, known as a CT600, with HMRC. The return reports taxable profits and calculates Corporation Tax due.
The normal filing deadline is 12 months after the end of the accounting period. Payment is usually due earlier, commonly nine months and one day after the accounting period ends for many small companies.
Larger companies may have to pay by instalments. Companies should check their own position rather than assume the standard deadline applies.
The CT600 is filed with supporting computations and company accounts. The figures should match the accounts, tax adjustments and any claims made.
Errors can cause penalties, interest or HMRC enquiries. Common issues include:
Using turnover instead of taxable profit
Missing capital allowances
Claiming non-allowable costs
Forgetting associated companies
Treating dividends as deductible expenses
Filing late
Paying after the deadline
Not reconciling PAYE, VAT and accounts records
For help with UK Corporation Tax rates, a Corporation Tax accountant Nottinghamshire, Marginal Relief, CT600 filing, or a limited company accountant Worksop, AccuCounts Pro Ltd can support the process from bookkeeping through to filing.
Corporation Tax support in Nottinghamshire
AccuCounts Pro Ltd provides company accounts, Corporation Tax returns, bookkeeping and tax planning for limited companies in Worksop, Nottinghamshire and surrounding areas.
Support can include:
Preparing annual accounts
Calculating Corporation Tax
Filing the CT600
Reviewing allowable expenses
Checking capital allowance claims
Advising on Marginal Relief
Reviewing bookkeeping records
Helping directors plan before the year end
Whether the company is based in Worksop, Retford, Nottingham, Mansfield, Bassetlaw, Sheffield or Doncaster, getting the calculation right can reduce stress and help avoid surprises.
The aim is simple: clear records, correct filing and better visibility over the company’s tax position.
Financial Peace of Mind.
Check the rates before making decisions
Corporation Tax rates and thresholds can change. HMRC guidance should always be checked before making decisions or filing a return.
The headline position is:
Profit level | Typical Corporation Tax treatment |
£50,000 or less | 19% Small Profits Rate, if eligible |
£50,000 to £250,000 | Marginal Relief may apply |
Over £250,000 | 25% main rate |
The real tax bill depends on the company’s taxable profits, accounting period, associated companies and available reliefs.
Accurate bookkeeping, proper tax adjustments, capital allowance reviews and year-end planning all help a company pay the correct amount of Corporation Tax. If profits are close to the thresholds, or if there is more than one company under common control, it is sensible to get advice before the year end rather than after it.
Need help with your Corporation Tax? Contact AccuCounts Pro Ltd for company accounts, CT600 filing, bookkeeping and tax planning support.
Official HMRC Corporation Tax rates should be checked for the latest rules.
Disclaimer: This article is for general information only and is not tax advice. Always check current HMRC guidance or seek professional advice.
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