Pillar Guide · Updated June 2026
UK Corporation Tax 2026/27
Corporation tax is the tax a limited company pays on its profits — and since April 2023 it is no longer a flat rate. In 2026/27, profits up to £50,000 are taxed at the 19% small profits rate, profits above £250,000 at the 25% main rate, and everything in between is taxed at 25% less marginal relief, giving an effective rate that climbs gradually between the two. This guide explains the rates, how marginal relief is calculated, how associated companies carve up the thresholds, the payment and filing deadlines that trip up new directors, quarterly instalments for large companies, and what you can deduct — with a worked example.
The Rates: 19% and 25%
Corporation tax has two headline rates in 2026/27, with a graduated band between them.
| Taxable profit | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,000 – £250,000 | 25% less marginal relief (~26.5% effective on the slice) |
| Above £250,000 | 25% (main rate) |
The thresholds assume a twelve-month accounting period and a single, unassociated company. Both are adjusted where neither holds true.
Marginal Relief
Marginal relief stops profits jumping straight from 19% to 25% at £50,001. You calculate tax at the full 25% main rate, then subtract marginal relief, computed using the standard fraction of 3/200 applied to the gap between the £250,000 upper limit and your profits (with an adjustment where the company has dividend income from outside its group).
The arithmetic produces a marginal rate of about 26.5% on each pound of profit between £50,000 and £250,000 — higher than the 25% main rate itself. That makes the band an important planning zone: an employer pension contribution or other deductible cost that pulls profit back below £50,000 is relieved at this elevated effective rate. Quantify it with the corporation tax calculator.
Associated Companies
The £50,000 and £250,000 limits are divided by the number of associated companies. Companies are associated when one controls another, or both are under common control through shareholdings or voting rights.
If you control three companies, each one’s lower limit becomes £16,667 and its upper limit £83,333 — so the 25% rate and marginal relief bite far sooner. This associated-companies test replaced the older 51% group rule from April 2023 and frequently catches owner-managers who run several companies or hold interests alongside family members. Structure deliberately and take advice before incorporating additional companies.
Allowable Deductions
Corporation tax is charged on profit after deducting costs incurred wholly and exclusively for the trade. Common deductions include:
- Staff salaries and employer National Insurance contributions.
- Rent, utilities, insurance and office costs.
- Accountancy, legal and other professional fees.
- Employer pension contributions (a key, fully deductible extraction route).
- Capital allowances on equipment — often 100% under the Annual Investment Allowance or full expensing.
Client entertaining and most fines are not deductible. Dividends are not deductible either — they come out of post-tax profit. See the dividends vs pension extraction comparison for the most efficient way to take profit out.
Payment & Filing Deadlines
Corporation tax deadlines catch out many new directors because the payment is due before the return:
- Pay the tax: nine months and one day after the accounting period ends (e.g. 1 January for a 31 March year-end).
- File the CT600: twelve months after the period ends.
- File statutory accounts at Companies House: generally nine months after the year-end for a private company.
Late filing of the CT600 starts at a £100 penalty and escalates. Diarise all three dates, and remember the return must usually be filed online with iXBRL-tagged accounts.
Quarterly Instalments for Large Companies
Large companies — broadly those with profits above £1.5 million (divided by associated companies) — do not pay in one lump sum. They pay in four quarterly instalments, which for a twelve-month period fall in months 7, 10, 13 and 16, so the first payment is due before the period ends.
Very large companies, with profits above £20 million, pay even earlier, in months 3, 6, 9 and 12. Accurate profit forecasting matters because both underpayment and overpayment can attract interest. Most owner-managed companies sit well below these thresholds and pay in a single instalment.
Worked Example: £120,000 of Profit
Take a single, unassociated company with £120,000 of taxable profit for a twelve-month period. Figures are illustrative for 2026/27 and assume no non-group dividend income.
- Tax at the main rate: £120,000 × 25% = £30,000.
- Marginal relief: 3/200 × (£250,000 − £120,000) = 3/200 × £130,000 = £1,950.
- Corporation tax due: £30,000 − £1,950 = £28,050.
- Effective rate: £28,050 ÷ £120,000 ≈ 23.4%.
The effective rate sits between 19% and 25%, exactly as marginal relief intends. A £20,000 employer pension contribution would cut profit to £100,000, reduce the bill and be relieved at the ~26.5% marginal rate on the affected slice. Run your own figures with the corporation tax calculator.