Corporation tax is the primary tax levied on the profits of UK limited companies, and understanding how it works is essential for every business operating in the United Kingdom. Since April 2023, the UK has operated a two-rate system: a 25% main rate for larger companies and a 19% small profits rate for companies with taxable profits of 50,000 GBP or below. Between these two thresholds, marginal relief provides a gradual transition so that companies are not penalised by a sudden jump in their tax rate.
This guide covers everything you need to know about UK corporation tax rates in 2026, including how the small profits rate works, how to calculate marginal relief, the impact of associated companies on your thresholds, payment deadlines, quarterly instalment payments for large companies, and practical strategies for managing your corporation tax obligations. Whether you are forming a new company or reviewing your existing tax position, this guide provides the detail required to plan effectively.
Who Pays Corporation Tax in the UK
Corporation tax applies to all UK-resident companies on their worldwide profits. A company is UK-resident if it is incorporated in the UK or if its central management and control is exercised in the UK. This includes private limited companies (Ltd), public limited companies (PLC), and other bodies corporate.
Non-UK companies that trade in the UK through a permanent establishment also pay corporation tax on the profits attributable to that establishment. If you are considering registering a company in the UK, understanding corporation tax obligations is a critical part of your planning.
Corporation tax is charged on a company's taxable profits, which include trading profits, investment income, and chargeable gains. It is not charged on turnover. The distinction matters because a company with high revenue but low margins may have a substantially lower tax bill than its turnover would suggest.
Current UK Corporation Tax Rates
The UK corporation tax system uses two rates with a marginal relief band between them.
| Profit Level | Tax Rate | Effective Rate |
|---|---|---|
| 0 to 50,000 GBP | 19% (small profits rate) | 19% |
| 50,001 to 250,000 GBP | 25% with marginal relief | 19% to 25% (sliding scale) |
| Above 250,000 GBP | 25% (main rate) | 25% |
These thresholds apply per company. If you control associated companies, the thresholds are divided among them, which can significantly affect which rate applies to your business.
The 25% Main Rate
The main rate of 25% applies to all companies with taxable profits above the upper limit of 250,000 GBP. This rate applies to the entirety of the company's profits, not just the amount above 250,000 GBP. There is no banding system where different rates apply to different slices of profit (unlike personal income tax). The main rate has been 25% since 1 April 2023, following an increase from 19%.
The 19% Small Profits Rate
Companies with taxable profits of 50,000 GBP or below pay the small profits rate of 19%. This rate was retained when the main rate increased to 25%, specifically to protect smaller businesses from the higher rate. The small profits rate applies to all of the company's profits for the accounting period.
To qualify for the small profits rate, the company must have augmented profits (taxable profits plus exempt distributions received from non-associated companies) of 50,000 GBP or below, and the company must not have any associated companies that would reduce the threshold.
Marginal Relief
Companies with profits between 50,000 GBP and 250,000 GBP benefit from marginal relief. The company is technically charged at the 25% main rate on all profits, but then a deduction is applied that reduces the effective rate. The formula for marginal relief is:
Marginal Relief = (Upper Limit - Augmented Profits) x (Taxable Total Profits / Augmented Profits) x Marginal Relief Fraction
The marginal relief fraction is 3/200 (or 1.5%).
The marginal relief formula can appear complex, but in practice it produces a straightforward result: the effective tax rate rises gradually from 19% at 50,000 GBP to 25% at 250,000 GBP. A company with profits of 150,000 GBP, for example, pays an effective rate of approximately 22%. Your accounting software or accountant will calculate this automatically when preparing your corporation tax return.
Worked Example: Marginal Relief Calculation
Consider a standalone company (no associated companies) with taxable profits of 100,000 GBP for the year ended 31 March 2026.
- Corporation tax at main rate: 100,000 x 25% = 25,000 GBP
- Marginal relief: (250,000 - 100,000) x (100,000 / 100,000) x 3/200 = 2,250 GBP
- Corporation tax payable: 25,000 - 2,250 = 22,750 GBP
- Effective rate: 22,750 / 100,000 = 22.75%
The marginal relief saves this company 2,250 GBP compared to paying the full 25% rate.
Associated Companies and Threshold Division
The 50,000 GBP and 250,000 GBP thresholds are not fixed per company. They are divided equally among the number of associated companies that exist at any point during the accounting period, plus the company itself.
A company is associated with another if one controls the other, or both are under common control. Control means holding the majority of voting rights, the right to the majority of distributable profits, or the right to the majority of assets on a winding up. Dormant companies are generally excluded from the associated companies count.
| Number of Associated Companies (Including the Company) | Lower Limit | Upper Limit |
|---|---|---|
| 1 (standalone) | 50,000 GBP | 250,000 GBP |
| 2 | 25,000 GBP | 125,000 GBP |
| 3 | 16,667 GBP | 83,333 GBP |
| 4 | 12,500 GBP | 62,500 GBP |
| 5 | 10,000 GBP | 50,000 GBP |
This rule is designed to prevent business owners from splitting a single business across multiple companies purely to access the small profits rate. If you are considering whether to operate through a single company or multiple entities, the associated companies rule is a significant factor in that decision. For a broader perspective on structuring your business, see our guide to UK business laws and regulations.
The associated companies rule applies based on common control, not common ownership of specific percentages. If you and your spouse each own a separate company, HMRC may treat them as associated if you and your spouse together control both companies. The rules around "connected persons" are broad, and professional advice is recommended if you control or are involved in multiple corporate entities.
What Counts as Taxable Profits
Corporation tax is charged on a company's total taxable profits for each accounting period. Taxable profits include:
- Trading profits: The profits from the company's trade or business, calculated after deducting allowable business expenses, capital allowances, and trading losses brought forward or carried back.
- Investment income: Interest received, rental income, and other non-trading income.
- Chargeable gains: Profits from the disposal of capital assets such as property, shares, or business assets. These are calculated after deducting the acquisition cost (adjusted for indexation where applicable) and any reliefs.
Allowable Deductions
Companies can deduct expenses that are incurred wholly and exclusively for the purposes of the trade. Common deductible expenses include:
- Staff salaries, wages, and employer National Insurance contributions
- Rent and business premises costs
- Professional fees (accounting, legal, consultancy)
- Marketing and advertising costs
- Travel and subsistence (for business purposes)
- Interest on business loans
- Bad debts written off
- Research and development expenditure (with enhanced R&D relief available)
Capital expenditure is not directly deductible against profits. Instead, companies claim capital allowances, which spread the tax relief over time. The Annual Investment Allowance (AIA) allows companies to deduct up to 1,000,000 GBP of qualifying capital expenditure in full in the year of purchase. Full expensing, introduced in 2023 and made permanent, allows companies to deduct 100% of qualifying plant and machinery expenditure in the year of purchase with no cap.
Payment Deadlines and Filing Requirements
Corporation Tax Return (CT600)
Every company that is liable for corporation tax must file a Company Tax Return (CT600) with HMRC. The filing deadline is 12 months after the end of the accounting period. For example, a company with an accounting period ending 31 March 2026 must file its CT600 by 31 March 2027.
The return must be filed electronically using HMRC-recognised software. It includes the company's tax computation, accounts, and any supplementary pages required for specific types of income, relief, or claim.
Payment Deadline
Corporation tax is due for payment 9 months and 1 day after the end of the accounting period. Using the same example, a company with an accounting period ending 31 March 2026 must pay its corporation tax by 1 January 2027.
Late payment attracts interest (currently charged at the Bank of England base rate plus 2.5%) and potentially penalties. HMRC does not send payment reminders, so it is the company's responsibility to ensure payment is made on time.
Quarterly Instalment Payments (QIPs)
Large companies -- those with taxable profits exceeding 1,500,000 GBP (divided by the number of associated companies plus one) -- must pay corporation tax in four quarterly instalments during the accounting period, rather than in a single payment after the period ends. The instalments are due in months 7, 10, 13, and 16 after the start of the accounting period.
Very large companies -- those with profits exceeding 20,000,000 GBP -- must pay in four instalments beginning in months 3, 6, 9, and 12 of the accounting period. This means the first payment is due just three months into the accounting period, before the company's results for the year are known. Companies in this category must estimate their profits and adjust subsequent payments as more accurate figures become available.
Corporation Tax Reliefs and Allowances
The UK offers several reliefs that can reduce a company's corporation tax liability.
Research and Development (R&D) Relief
Companies that carry out qualifying R&D activities can claim enhanced tax relief. The merged R&D scheme (which replaced the separate SME and large company schemes from 1 April 2024) provides a deduction of 186% of qualifying R&D expenditure for most companies. R&D intensive SMEs (where qualifying R&D expenditure is at least 30% of total expenditure) can claim enhanced support through the ERIS (Enhanced R&D Intensive Support) scheme.
Annual Investment Allowance and Full Expensing
The AIA provides 100% first-year relief on up to 1,000,000 GBP of qualifying plant and machinery expenditure per year. Full expensing provides 100% first-year relief on qualifying main rate plant and machinery with no upper limit, and 50% first-year relief on special rate assets.
Trading Loss Relief
Companies can carry trading losses back one year to offset against profits of the previous accounting period, generating a corporation tax refund. Losses can also be carried forward indefinitely to offset against future profits of the same trade. A deductions allowance of 5,000,000 GBP applies, beyond which only 50% of remaining profits can be offset by brought-forward losses.
Patent Box
Companies that earn profits from patented inventions can elect to apply the Patent Box regime, which taxes qualifying profits at an effective rate of 10%. The patent must be granted by the UK Intellectual Property Office, the European Patent Office, or certain other qualifying patent offices.
Creative Industry Reliefs
Specific tax reliefs are available for companies involved in film production, television production, video games development, animation, theatre, orchestra, and museums and galleries exhibitions. These reliefs provide enhanced deductions or tax credits on qualifying expenditure.
Accounting Periods and Short Accounting Periods
A corporation tax accounting period cannot exceed 12 months. If a company prepares accounts for a period longer than 12 months (for example, an 18-month first period of accounts after incorporation), HMRC will split this into two accounting periods for corporation tax purposes: the first covering 12 months and the second covering the remaining period.
Short accounting periods (less than 12 months) are common when a company is incorporated partway through a year or changes its year-end date. The 50,000 GBP and 250,000 GBP thresholds are reduced proportionately for short accounting periods. For a 6-month period, the lower limit becomes 25,000 GBP and the upper limit becomes 125,000 GBP.
Registering for Corporation Tax
New companies must register for corporation tax with HMRC within 3 months of starting to trade. HMRC usually sends a notice to new companies shortly after incorporation through Companies House, but it is the company's responsibility to ensure registration takes place. Registration can be completed online through the HMRC website.
Once registered, HMRC will issue a Unique Taxpayer Reference (UTR) number and set up the company's corporation tax record. The UTR is needed for filing returns and making payments.
If you are in the process of setting up a new company, see our complete guide to registering a company in the UK for information on the Companies House registration process and how it connects to your HMRC obligations.
Planning Considerations
Choosing Your Accounting Year-End
While many companies use 31 March or 5 April (to align with the tax year) or 31 December (calendar year), you can choose any date. Your choice of year-end can affect your cash flow because it determines when your corporation tax payment is due. A 31 March year-end means payment is due by 1 January -- which may or may not suit your business cycle.
Salary vs Dividends
For owner-managed companies, the balance between director salary and dividend extraction has a direct impact on the company's corporation tax bill. Salary is a deductible expense that reduces taxable profits, while dividends are paid from post-tax profits. The optimal strategy depends on the interplay between corporation tax, income tax, and National Insurance. For a detailed analysis, see our guide to tax-efficient salary and dividends.
VAT Interaction
Corporation tax is calculated on profits before VAT is accounted for separately. However, if your company is not VAT-registered and incurs VAT on purchases, that irrecoverable VAT becomes part of the cost of the expense and is included in the corporation tax computation. Understanding UK VAT obligations is therefore relevant to your overall tax position.
Every UK limited company must file a corporation tax return even if it has made no profit or has no tax to pay. Failure to file a return on time results in automatic penalties starting at 100 GBP and increasing to 1,600 GBP or more for persistent late filing. HMRC may also issue a tax determination (an estimated assessment) if a return is not filed, and this carries no right of appeal until the actual return is submitted.
Key Dates Summary for 2026
For a company with a standard 31 March 2026 year-end:
- 1 April 2026: New accounting period begins
- 31 March 2027: Filing deadline for CT600 (12 months after period end)
- 1 January 2027: Payment deadline (9 months and 1 day after period end)
- Quarterly instalments (if applicable): Due in months 7, 10, 13, and 16 from the start of the period
Penalties for Late Filing and Payment
HMRC applies automatic penalties for late filing of the CT600:
- 1 day late: 100 GBP penalty
- 3 months late: another 100 GBP penalty
- 6 months late: HMRC estimates the tax due and adds a penalty of 10% of the unpaid tax
- 12 months late: additional 10% penalty on unpaid tax
Late payment of corporation tax attracts interest at the Bank of England base rate plus 2.5%. Persistent late payment may result in HMRC requiring future payments by quarterly instalments.
International Considerations
UK-resident companies are taxed on worldwide profits, but double tax treaties with over 130 countries prevent the same income from being taxed twice. If your company earns income abroad, credit relief or exemption may be available to offset foreign tax against your UK corporation tax liability.
The UK has specific rules for transfer pricing, controlled foreign companies (CFCs), and the diverted profits tax (at 25%) to prevent artificial profit shifting. Companies operating across borders should seek specialist advice to ensure compliance and optimise their tax position. For companies considering other jurisdictions alongside the UK, our country comparison guides provide useful context.
References
- HM Revenue and Customs. "Corporation Tax rates and reliefs." GOV.UK. https://www.gov.uk/corporation-tax-rates
- HM Revenue and Customs. "Marginal Relief for Corporation Tax." GOV.UK. https://www.gov.uk/guidance/marginal-relief-for-corporation-tax
- HM Revenue and Customs. "Corporation Tax: associated companies." GOV.UK. https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm03820
- HM Revenue and Customs. "Pay your Corporation Tax." GOV.UK. https://www.gov.uk/pay-corporation-tax
- HM Revenue and Customs. "Corporation Tax: quarterly instalment payments." GOV.UK. https://www.gov.uk/guidance/corporation-tax-quarterly-instalment-payments
- HM Revenue and Customs. "Research and Development tax reliefs." GOV.UK. https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief
Frequently Asked Questions
What is the UK corporation tax rate in 2026?
The main UK corporation tax rate is 25% for companies with taxable profits above 250,000 GBP. Companies with profits of 50,000 GBP or below pay the small profits rate of 19%. Companies with profits between 50,000 GBP and 250,000 GBP pay an effective rate between 19% and 25% due to marginal relief.
How does UK marginal relief work for corporation tax?
Marginal relief applies to companies with taxable profits between 50,000 GBP and 250,000 GBP. The company pays the main rate of 25% on all profits but then deducts marginal relief, which is calculated using the formula: (upper limit minus profits) multiplied by profits divided by profits, multiplied by the fraction 3/200. This produces an effective tax rate that gradually increases from 19% to 25% as profits rise through the marginal band.
When is UK corporation tax due?
Corporation tax is due 9 months and 1 day after the end of your accounting period. For example, if your accounting period ends on 31 March 2026, payment is due by 1 January 2027. Large companies with profits above 1.5 million GBP must pay in quarterly instalments during the accounting period itself.
Do associated companies affect my corporation tax rate?
Yes. The 50,000 GBP and 250,000 GBP thresholds are divided equally among the total number of associated companies plus the company itself. If you control two associated companies, the lower limit becomes 16,666 GBP and the upper limit becomes 83,333 GBP per company. This prevents business owners from splitting profits across multiple companies to access the small profits rate.