How much Corporation Tax Marginal Relief applies to £175,000 profit in 2026/27?

Full answer

Marginal Relief reduces the Corporation Tax bill for companies with profits between £50,000 and £250,000, tapering to zero as profits approach the upper limit. The formula is Marginal Relief = (Upper Limit minus profit) multiplied by the marginal relief fraction of 3/200. On £175,000 profit: Marginal Relief = (£250,000 minus £175,000) times 3/200 = £75,000 times 0.015 = £1,125. Corporation Tax at the full 25% main rate on £175,000 is £43,750, and after deducting the £1,125 relief the payable amount is £42,625. That is an effective rate of 24.36% (£42,625 divided by £175,000) -- much closer to the full 25% main rate than to the 19% small profits rate, because £175,000 is deep into the upper part of the marginal band, only £75,000 short of losing relief altogether. This shows how quickly Marginal Relief loses value as profits rise: at £60,000 profit the effective rate is 20.25%, but by £175,000 it has climbed to 24.36%, a difference of over four percentage points despite the headline rate never changing. Companies approaching this profit level often review whether further growth justifies restructuring, since profits above £250,000 pay the full 25% rate with no relief at all. Use the Corporation Tax calculator to check the exact relief and effective rate for your company.

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