Tax year: 2026/27 | Last reviewed: 2 October 2026
Corporation tax rates have been stable since April 2023 and the government has committed to capping the main rate at 25% for this Parliament. What catches companies out is the band between £50,000 and £250,000, where marginal relief creates an effective rate of 26.5% on each extra pound of profit.
Corporation tax rates for the year starting 1 April 2026
| Taxable profits | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 to £250,000 | 25% less marginal relief (effective marginal rate 26.5%) |
| Over £250,000 | 25% (main rate) |
How marginal relief works
Between £50,000 and £250,000, tax is charged at 25% and then reduced by marginal relief:
Marginal relief = 3/200 x (£250,000 less taxable profits)
Example: profits of £100,000. Tax at 25% is £25,000. Marginal relief is 3/200 x £150,000 = £2,250. Corporation tax is £22,750, an average rate of 22.75%.
Each £1 of profit between the limits costs 26.5p in tax. That makes this band the most valuable place to claim reliefs or make employer pension contributions: a £10,000 contribution saves £2,650.
Associated companies and short periods
The £50,000 and £250,000 limits are divided by the number of associated companies, meaning companies under common control, including some controlled by close family. Two associated companies each get limits of £25,000 and £125,000. Dormant companies and passive holding companies are ignored. The limits are also reduced proportionately for accounting periods shorter than 12 months.
This is a common trap for directors who set up a second company, for example for property. See our article on intercompany loans and group structures.
When corporation tax is due
- Payment: nine months and one day after the end of the accounting period, for companies with profits under £1.5 million
- CT600 return: 12 months after the end of the accounting period
- Large companies (profits over £1.5 million) pay in quarterly instalments
Paying early can earn interest from HMRC. Read paying corporation tax early.
Ways to reduce the bill legitimately
- Employer pension contributions for directors and staff
- Annual Investment Allowance of up to £1 million on plant and machinery, or full expensing for companies
- The new 40% first year allowance on qualifying plant from January 2026
- 100% first year allowance on new electric cars until 31 March 2027. See electric company cars
- R&D relief under the merged scheme, for qualifying innovation
- Staff benefits that are deductible and tax-efficient, covered in investing in employees
FAQs
What is the corporation tax rate for 2026/27?
19% on profits up to £50,000, 25% on profits over £250,000, with marginal relief in between.
Is corporation tax based on the tax year?
No. It is charged on each company accounting period, with rates set for financial years running 1 April to 31 March.
Do I pay corporation tax as a sole trader?
No, sole traders pay income tax and NI. See sole trader tax 2026/27.
Talk it through with Digivolve
We prepare your accounts and CT600 early, so you know your corporation tax figure months before it is due and can plan dividends and pension contributions around it.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.