Corporation Tax Rates 2025/26 — and how marginal relief works
Direct Answer
There are two corporation tax rates in 2025/26: 19% (small profits rate) on profits up to £50,000 and 25% (main rate) on profits over £250,000. Companies with profits between these thresholds pay a blended effective rate via marginal relief — tapering from 19% toward 25%. Thresholds are divided between associated companies. Corporation tax is due 9 months and 1 day after your accounting period ends.
Corporation tax rates at a glance
The dual-rate structure has been in place since April 2023. The rates are unchanged for 2025/26.
| Taxable profit band | Rate | Effective rate | Notes |
|---|---|---|---|
| £0 – £50,000 | 19% | 19% | Small profits rate — no marginal relief needed |
| £50,001 – £250,000 | 19–25% | Blended via marginal relief | Marginal rate on profits in this band is effectively 26.5% |
| Over £250,000 | 25% | 25% | Main rate — full 25% applies to all profits |
Note: the marginal relief fraction means profits between £50k and £250k effectively attract a 26.5% marginal rate — higher than the headline 25%.
How marginal relief works
Marginal relief smooths the step from 19% to 25% so there's no cliff edge. HMRC calculates it using a fraction (3/200) applied to the difference between the upper limit and your profits.
The HMRC formula
HMRC's online marginal relief calculator handles this automatically. Your accountant will apply it in your CT600 return.
Worked examples
| Profit: £40,000 | |
| Tax @ 19%: | £7,600 |
| Marginal relief: | None |
| Tax payable: | £7,600 |
| Profit: £100,000 | |
| Tax @ 25%: | £25,000 |
| Marginal relief: (£250k−£100k)×3/200: | −£2,250 |
| Tax payable: | £22,750 |
| Effective rate: 22.75% | |
| Profit: £300,000 | |
| Tax @ 25%: | £75,000 |
| Marginal relief: | None (over £250k) |
| Tax payable: | £75,000 |
Associated companies — the hidden trap
The £50,000 and £250,000 thresholds are divided by the number of associated companies. This catches directors who run multiple companies or whose spouse also controls a company.
| Associated companies | Small profits threshold | Upper threshold |
|---|---|---|
| 1 (just you) | £50,000 | £250,000 |
| 2 companies | £25,000 | £125,000 |
| 3 companies | £16,667 | £83,333 |
| 4 companies | £12,500 | £62,500 |
Thresholds apply per company, not in total. Two companies with £60,000 profit each are both in the marginal relief band.
What counts as "associated"?
Two companies with the same controlling shareholder
Your company + your spouse's company (if you have significant influence)
A holding company + its subsidiaries
Companies where shareholders act together on a common basis
Dormant company exception
A dormant associated company is excluded from the count — provided it was dormant throughout the entire accounting period and you can evidence this to HMRC.
Payment deadlines and penalties
Unlike income tax, corporation tax is not deducted at source. You must calculate, file and pay it yourself — or instruct your accountant to do so.
CT600 filing deadline
File your Company Tax Return (CT600) within 12 months of your accounting period end.
Example: year end 31 Mar → file by 31 Mar following year
Tax payment deadline
Pay corporation tax 9 months and 1 day after your accounting period end — three months before the filing deadline.
Example: year end 31 Mar → pay by 1 Jan
Large companies: QIPs
Companies with profits over £1.5 million must pay in quarterly instalments (QIPs) during the accounting period itself.
4 instalments: months 7, 10, 13, 16 after period start
| Failure | Penalty / consequence |
|---|---|
| CT600 filed 1 day late | £100 automatic penalty |
| CT600 filed 3 months late | Further £100 penalty |
| CT600 filed 6 months late | HMRC estimates the tax — adds 10% of unpaid tax |
| CT600 filed 12 months late | Additional 10% of unpaid tax |
| Tax paid late | Interest at HMRC's rate (currently 7.75% p.a.) from due date |
| Deliberate understatement | Up to 100% of tax due as a penalty |
Reducing your corporation tax bill — legitimately
Corporation tax is calculated on profits after allowable deductions. Maximising deductions is the most straightforward planning tool available.
Employer pension contributions
Paid before year-end, fully deductible. On a £20,000 contribution at the 25% rate, the company saves £5,000 in corporation tax.
Annual Investment Allowance
100% first-year deduction on qualifying plant and machinery up to £1 million per year. Purchase equipment before year-end to accelerate relief.
R&D Tax Relief (SME scheme)
SMEs can deduct 186% of qualifying R&D costs (or receive a 10% cash credit if loss-making) under the merged R&D scheme from April 2024.
Salary to family members
Paying a genuine salary to a spouse or family member employed in the business is deductible. The salary must be commercially justifiable for the role.
Prepay deductible expenses
Prepaying certain expenses before year-end (e.g. insurance, subscriptions) may bring the deduction into an earlier, higher-rate year.
Losses and group relief
Trading losses can be carried back 12 months (or forward indefinitely). Groups of companies can also share losses between group members via group relief.
Marginal relief planning tip
Because profits between £50,000 and £250,000 attract an effective 26.5% marginal rate, making a pension contribution or AIA claim that reduces profits below £50,000 could save more than just 19% on the final slice — it removes you from the marginal band entirely.
Example: Profits of £60,000 → the marginal rate on the £10,000 above £50k is 26.5%. A £10,001 employer pension contribution drops profits to £49,999 and saves corporation tax of ~£2,650 on that slice — better than the 19% headline rate suggests.
How to file and pay
Corporation tax is self-assessed. You must register with HMRC for corporation tax within 3 months of starting to trade, file a CT600 and pay by the deadline.
Prepare statutory accounts — Your accountant prepares annual accounts (P&L, balance sheet) for the accounting period. These form the basis of the CT600.
Complete CT600 tax computations — Accounting profit is adjusted for tax (add back non-deductibles, claim allowances like AIA) to arrive at taxable profit.
File CT600 online via HMRC — Submit via HMRC's online portal or through third-party accounting software (Xero, QuickBooks, FreeAgent). Must include iXBRL-tagged accounts.
Pay by the 9 months + 1 day deadline — Pay via bank transfer (Faster Payments), BACS or CHAPS to HMRC's bank account. Your UTR is the payment reference.
Common accounting year examples
| Year end | Pay by | File by |
|---|---|---|
| 31 March | 1 January | 31 March (next year) |
| 30 April | 1 February | 30 April (next year) |
| 31 May | 1 March | 31 May (next year) |
| 30 June | 1 April | 30 June (next year) |
| 31 December | 1 October | 31 December (next year) |
Don't forget: first year is often shorter
If you incorporated mid-year, your first accounting period may be less than 12 months. The thresholds are time-apportioned pro-rata for short periods. Your accountant will handle this automatically.
Make sure your CT600 is right.
Autobooks files your corporation tax return, claims all available reliefs and alerts you to marginal relief planning opportunities — from £89+VAT/month.