How does corporation tax marginal relief work in 2026/27?

Full answer

For 2026/27, corporation tax is 19% on profits up to £50,000 (the small profits rate) and 25% on profits of £250,000 or more (the main rate). Without marginal relief a company nudging from £50,000 to £50,001 of profit would face a sharp tax jump, so marginal relief bridges the two rates smoothly. The method is to calculate tax at the full 25% main rate, then subtract marginal relief. Marginal relief equals the standard marginal relief fraction of 3/200 multiplied by the difference between the upper limit of £250,000 and your taxable profit (technically augmented profits, which include certain exempt distributions). For example, on £100,000 of profit the relief is 3/200 times (£250,000 minus £100,000), which is 3/200 times £150,000, or £2,250; tax at 25% is £25,000, so the bill is £22,750, an effective rate of 22.75%. The effective rate within the band ranges from 19% just above £50,000 up to 25% at £250,000, but the marginal rate on each extra pound of profit in this band is actually 26.5%, which is worth knowing when timing income or expenses. The £50,000 and £250,000 limits are divided by the number of associated companies plus one, and are reduced proportionately for accounting periods shorter than 12 months. Directors often manage profit near these thresholds using pension contributions and capital allowances. Use the corporation tax calculator to apply marginal relief automatically to your profit figure.

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More answers

• How much corporation tax do I pay on £200,000 of company profit in 2026/27?
• What is the Corporation Tax small profits rate for 2026/27?