Associated Companies and Corporation Tax Limits 2026/27

Why associated companies matter

Corporation tax in 2026/27 charges 19% on profits up to GBP 50,000 and 25% on profits from GBP 250,000, with marginal relief in between using the 3/200 fraction. Those limits assume you have a single company. If you control more than one company, the limits are shared.

This catches out a lot of owner-managers who set up a second trading company, a property company, or keep an old company on the register. Each extra associated company shrinks the thresholds and can push profits into the 25% main rate or the 26.5% marginal band sooner than expected.

How the division works

You divide both limits by the number of associated companies plus one (the plus one being the company you are calculating tax for).

• One company on its own: GBP 50,000 and GBP 250,000.
• Two associated companies: GBP 25,000 and GBP 125,000 each.
• Three associated companies: GBP 16,667 and GBP 83,333 each (roughly).

A worked example

You own two trading companies under common control, each making GBP 60,000 of profit in 2026/27.

• Standalone, GBP 60,000 would sit just above the GBP 50,000 lower limit, mostly at 19% with a thin marginal slice.
• As associated companies, the lower limit for each is GBP 25,000 and the upper limit is GBP 125,000. So all GBP 60,000 in each company now falls inside the marginal band.

For one company: tax at 25% is GBP 15,000, less marginal relief of (GBP 125,000 - GBP 60,000) x 3/200 = GBP 65,000 x 0.015 = GBP 975. Corporation tax due is GBP 14,025, an effective rate of about 23.4%, noticeably higher than if the company stood alone.

What counts and what does not

• Companies under the control of the same person or persons are associated.
• Control normally means over 50% of share capital, votes or rights to assets.
• Dormant companies are generally ignored.
• Passive holding companies meeting the conditions can be excluded.
• Non-UK resident companies under common control still count.
• The test looks across the whole accounting period, not just year end.

Planning sensibly

Do not let associated company rules drive bad structuring, but be aware of them. Closing genuinely dormant companies, avoiding unnecessary extra companies, and timing the start or cessation of a trade can all affect how many associates you have in a period. Get the structure reviewed before you incorporate a second company.

The bottom line

For 2026/27, every associated company divides your GBP 50,000 and GBP 250,000 corporation tax limits, which can quietly raise your effective rate. Two associated companies each earning GBP 60,000 are fully in the marginal band rather than mostly at 19%.

Model the impact with the calchub.uk corporation tax calculator, and confirm the control and association definitions on gov.uk before you set up or wind down a company.