How Much is Corporation Tax?

Corporation Tax rates vary by profit level. Small companies pay 19%, larger companies pay 25%, with marginal relief applying in between.

Last reviewed: 12 June 2026 | Reading time: 4 minutes | Verified against 4 sources

Current Corporation Tax Rates (2026-27)

The UK operates a two-tier Corporation Tax system introduced in April 2023:¹

Small profits rate (19%)

Applies to profits up to £50,000

Marginal relief band

£50,001 to £250,000 (effective rate 23-26.5%)

Main rate (25%)

Applies to profits over £250,000

Payment deadline

9 months and 1 day after accounting period ends

How Marginal Relief Works

If your profit falls between £50,000 and £250,000, you don't simply pay 25% on everything. Instead, marginal relief reduces your tax bill.²

The calculation is complex, but the effect is straightforward: your effective rate gradually increases from 19% to 25% as profit rises through the band. At £100,000 profit, your effective rate is approximately 23.75%. At £150,000, it's around 24.5%.

HMRC provides a marginal relief calculator to work out your exact liability.³

Worked Examples

Example 1: Profit £30,000

Your profit is below £50,000, so you pay the small profits rate:

• Corporation Tax: £30,000 × 19% = £5,700
• Effective rate: 19%

Example 2: Profit £100,000

Your profit falls in the marginal relief band:

• Before relief: £100,000 × 25% = £25,000
• Marginal relief: £1,250
• Corporation Tax due: £23,750
• Effective rate: 23.75%

Example 3: Profit £300,000

Your profit exceeds £250,000, so you pay the main rate on everything:

• Corporation Tax: £300,000 × 25% = £75,000
• Effective rate: 25%

What Counts as Profit?

Corporation Tax is charged on taxable profit, not turnover. You can deduct allowable business expenses including:

• Business running costs (rent, utilities, software)
• Employee wages and employer National Insurance
• Equipment and machinery (capital allowances)
• Professional fees (accountant, lawyer)
• Marketing and advertising costs
• Pension contributions

You cannot deduct dividends paid to shareholders, client entertaining costs, or fines and penalties.⁴

Associated Companies Rule

If you control multiple companies, the profit thresholds are divided between them. For example:

• You run two associated companies
• Small profits threshold becomes £25,000 per company (£50k ÷ 2)
• Main rate threshold becomes £125,000 per company (£250k ÷ 2)

This prevents business owners from artificially splitting operations to stay under the £50,000 threshold.²

When You Pay

Corporation Tax is due 9 months and 1 day after your accounting period ends. For example:

• Accounting period ends: 31 March 2027
• Tax return deadline: 31 March 2028
• Payment deadline: 1 January 2028

Large companies (over £1.5m profit) pay Corporation Tax quarterly in advance.¹

Rate Changes Since 2010

Corporation Tax rates have changed significantly over the past 15 years:

• 2010: 28% main rate
• 2015: 20% single rate
• 2017: 19% single rate (lowest in G20)
• 2023: Two-tier system introduced (19%/25%)
• 2026-27: Same two-tier rates continue

The government announced rates will remain at 19%/25% through at least 2029.¹

Comparison with Sole Trader Tax

Sole traders pay Income Tax on profits (20%/40%/45%) plus Class 2 and Class 4 National Insurance. For profits above £30,000, limited company status is often more tax-efficient because:

• Corporation Tax (19%) is lower than Income Tax basic rate (20%) + NI (9%) = 29%
• You can time dividend extraction to manage personal tax
• Company pension contributions are deductible

See our Corporation Tax guide for more detail on how the tax works and when it applies.

Last reviewed: 12 June 2026