Part of our complete guide to Corporation Tax.
Three bands, not one flat rate
UK corporation tax isn't a single flat percentage, it works in three bands based on annual profit:
- Up to £50,000 profit: small profits rate of 19%
- £50,000 to £250,000 profit: marginal relief tapers the effective rate between 19% and 25%
- Above £250,000 profit: main rate of 25% on the whole profit
Verify before relying on this: the standard payment deadline (9 months and 1 day after your accounting period end) is widely cited but hasn't been freshly re-confirmed against gov.uk at the time of writing. See our note on when corporation tax is due and check with us for your specific accounting period.
How marginal relief actually works
Without marginal relief, a company earning £51,000 profit would suddenly face a much higher average tax rate than one earning £49,999, a harsh cliff edge. Marginal relief smooths this out: as profit rises from £50,000 to £250,000, the effective rate climbs gradually from 19% toward 25%, rather than jumping straight to it.
For a precise figure on your own profit level, use our corporation tax calculator, which applies marginal relief automatically rather than requiring you to work through the formula by hand.
Associated companies change the thresholds
If your company has "associated companies" (broadly, companies under common control), the £50,000 and £250,000 thresholds are divided between them. Two associated companies each effectively get a £25,000 and £125,000 threshold, not the full £50,000 and £250,000 each. This catches group structures and some multi-company setups off guard.
What this means in practice
If your company's profit sits comfortably under £50,000, you're on the 19% rate and this mostly doesn't affect you directly. If you're anywhere near or above that line, especially if profit is growing, it's worth modelling your actual marginal rate rather than assuming a flat 19% or 25%, the difference between a well-planned dividend/retention strategy and an unplanned one can be significant at the margin.
Want your exact position modelled? Book a free consultation and we'll calculate your real effective rate, factoring in associated companies if relevant, and plan around it.
Frequently asked questions
What is the small profits rate of corporation tax?
19%, applying to profits up to £50,000. Companies below this threshold pay the lowest corporation tax rate available.
What is the main rate of corporation tax?
25%, applying to profits above £250,000. Between £50,000 and £250,000, marginal relief tapers the effective rate between the two.
What is marginal relief?
A tapering mechanism that smooths the jump between the 19% small profits rate and the 25% main rate, so a company just above £50,000 profit does not suddenly pay 25% on everything.
Do the £50,000 and £250,000 thresholds change if I have associated companies?
Yes, both thresholds are divided by the number of associated companies under common control, so a group structure can push individual companies into a higher effective band sooner than a standalone company would be.