Corporation Tax for Small Limited Companies: 2026/27 Guide
Every UK limited company pays Corporation Tax on its profits, but small companies benefit from a lower rate band and marginal relief that many directors don’t fully understand or plan around. This guide from Filing Accounts UK explains how Corporation Tax works for small companies specifically, with a worked marginal relief example, using only verified facts from HMRC guidance.
At Filing Accounts, we prepare and file Corporation Tax returns for UK small businesses. For the full set of current rates and thresholds across all UK taxes, see our complete UK tax rates guide.
What Is Corporation Tax?
Corporation Tax is charged on the profits of UK-registered companies, including trading income, investment income, and chargeable gains on the sale of business assets. It’s calculated based on your company’s accounting period and is due 9 months and 1 day after that period ends — before your Company Tax Return (CT600) filing deadline of 12 months after the period ends.
Corporation Tax Rates for Small Companies
| Profit Level | Rate |
|---|---|
| Up to £50,000 (Small Profits Rate) | 19% |
| £50,001 – £250,000 | Marginal Relief (tapered between 19% and 25%) |
| Over £250,000 (Main Rate) | 25% |
If your company has associated companies (under common control), the £50,000 and £250,000 thresholds are divided between them — so a director running two companies would see each threshold halved to £25,000 and £125,000.
Worked Example: Marginal Relief in Practice
A standalone company with no associated companies makes £100,000 in taxable profit for the year.
- Without marginal relief, this would be taxed entirely at 25% = £25,000.
- Marginal relief reduces this using a standard HMRC formula, bringing the effective rate down for profits in the £50,000–£250,000 band.
- In practice, this means the company pays somewhere between 19% and 25% overall — closer to the lower end for profits near £50,000, and closer to 25% as profits approach £250,000.
Because of how the relief tapers, the effective marginal rate on each additional pound of profit within this band can actually reach approximately 26.5% — higher than the 25% main rate itself. This is why some small companies choose to manage the timing of income and allowable expenses around this band. Most accounting software and CT600 filing tools calculate marginal relief automatically, but understanding why the effective rate can exceed 25% helps avoid surprises.
Key Reliefs Worth Knowing
- Annual Investment Allowance (AIA): up to £1 million of qualifying capital expenditure on equipment or machinery can be deducted in full from taxable profits in the year of purchase.
- Patent Box: profits from patented inventions can qualify for a reduced 10% Corporation Tax rate.
- R&D tax relief: qualifying research and development costs can attract enhanced deductions or a payable credit, depending on the scheme your company falls under.
Common Mistakes to Avoid
Assuming Marginal Relief Caps the Rate at 25%
The effective rate on profits within the marginal relief band can exceed 25% on the last pound earned, even though the headline main rate is 25%.
Forgetting Associated Companies Split the Thresholds
Directors controlling more than one company often don’t realise the £50,000 and £250,000 thresholds are divided between them, pushing profits into the higher effective rate sooner than expected.
Missing the Corporation Tax Payment Deadline
Payment is due 9 months and 1 day after your accounting period ends — earlier than the 12-month CT600 filing deadline. See our guide on what to do if you can’t pay your Corporation Tax bill.
Frequently Asked Questions
What Corporation Tax rate do small companies pay?
19% on profits up to £50,000. Between £50,000 and £250,000, marginal relief tapers the rate up toward the 25% main rate.
When is Corporation Tax due?
9 months and 1 day after your accounting period ends.
Does having more than one company affect my Corporation Tax rate?
Yes. Associated companies split the £50,000 and £250,000 thresholds between them, which can push profits into a higher effective rate sooner.
Need Help With Corporation Tax? Talk to Filing Accounts UK
Marginal relief, associated company rules, and available reliefs are easy to miscalculate without support. At Filing Accounts, we prepare and file Corporation Tax returns for UK small businesses, making sure you pay the right amount — not more.
You may also find these related guides helpful:
