Accountant For A Limited Company

What is the Corporation Tax Rates in the UK?

UK corporation tax for 2025/26 has two rates: a 19% small profits rate on taxable profits up to £50,000 and a 25% main rate on profits above £250,000. Profits between these thresholds qualify for marginal relief, producing an effective rate up to around 26.5%. Thresholds are shared between associated companies and pro-rated for accounting periods shorter than 12 months.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 3

Key takeaways

The 2025/26 small profits rate is 19% on taxable profits up to £50,000, applying to most UK limited companies with modest annual trading profits.
The main corporation tax rate is 25% on taxable profits above £250,000, with marginal relief tapering the effective rate between the two thresholds.
Marginal relief applies to profits between £50,000 and £250,000, producing a marginal effective rate of around 26.5% on the slice above £50,000.
The £50,000 and £250,000 thresholds are shared equally between associated companies, so two associated companies each have limits of £25,000 and £125,000.
Thresholds are pro-rated for accounting periods shorter than 12 months, and close investment-holding companies and non-UK resident companies always pay the 25% main rate.

What is Corporation Tax?

Corporation Tax is a tax that UK businesses pay on their profits. It applies to both small and large companies, making it a key financial responsibility for businesses operating in the UK. Unlike Income Tax, which individuals pay, Corporation Tax is charged on company earnings after deducting expenses but before distributing dividends.

Who Needs to Pay Corporation Tax?

Corporation Tax applies to a wide range of businesses and organisations, including:

Limited Companies – All UK-based limited companies must pay Corporation Tax on their taxable profits. This includes businesses registered with Companies House.
Foreign Companies with UK Branches – If an overseas company operates in the UK through a branch or office, it must pay Corporation Tax on any profits made within the country.
Clubs, Societies, and Associations – Some non-profit organisations, such as sports clubs, cooperatives, and trade associations, may also be liable for Corporation Tax if they generate taxable profits.

What Counts as Taxable Profits?

Corporation Tax is charged on different types of earnings, including:

Profits from trading activities (selling products or services).
Income from investments.
Capital gains from selling assets, such as property, shares, or equipment.

Since businesses do not receive a personal allowance like individuals, they must pay Corporation Tax on all taxable profits, regardless of the amount.

Corporation Tax Rates 2024/25

The corporation tax rate for company profits is 25%.

As of April 1, 2023, the UK's Corporation Tax structure has been revised to introduce a tiered system based on company profits. This change aims to create a fairer tax environment by aligning tax rates more closely with a company's profitability. The current UK Corporation Tax rate is 25% for all limited companies.

Breakdown of the Current Corporation Tax Rates:

Main Rate: Companies with profits exceeding £250,000 are subject to a Corporation Tax rate of 25%.
Small Profits Rate: Companies with profits of £50,000 or less benefit from a reduced Corporation Tax rate of 19%.
Marginal Relief: For companies with profits between £50,000 and £250,000, a system of Marginal Relief applies. This relief provides a gradual increase in the effective Corporation Tax rate, bridging the gap between the small profits rate and the main rate.

Corporate Tax Thresholds

Small Companies: Businesses with profits at or below £50,000 pay Corporation Tax at the small profits rate of 19%. This lower rate supports smaller enterprises by reducing their tax burden.
Large Companies: Enterprises with profits exceeding £250,000 are taxed at the main rate of 25%. This higher rate reflects the increased profitability and capacity of larger corporations to contribute more in taxes.
Medium-Sized Companies: Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate.

Marginal Relief for Corporation Tax

Businesses with profits below £250,000 may qualify for Marginal Relief, which helps reduce their Corporation Tax bill.

Lower limit: £50,000
Upper limit: £250,000

Marginal Relief applies to companies with profits between these limits, gradually increasing the tax rate from the small profits rate to the main Corporation Tax rate. This means eligible businesses pay a rate lower than the standard 25%, easing the tax burden as profits grow.

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Frequently asked questions

What is the UK corporation tax rate for 2025/26?

For the 2025/26 financial year, UK corporation tax uses two headline rates. The small profits rate is 19% on taxable profits up to £50,000. The main rate is 25% on taxable profits above £250,000. Companies with profits between £50,000 and £250,000 pay the 25% main rate reduced by marginal relief, producing a tapered effective rate. These rates apply to limited companies resident in the UK and to overseas companies with UK branches.

How does marginal relief work for corporation tax?

Marginal relief bridges the 19% small profits rate and the 25% main rate for companies with taxable profits between £50,000 and £250,000. HMRC applies a formula that gradually increases the effective rate as profits rise, so the slice above £50,000 is effectively taxed at around 26.5%. The blended rate across total profits sits between 19% and 25%. Relief is claimed in the company tax return and reduces the main rate liability.

Who has to pay UK corporation tax?

Corporation tax applies to UK resident limited companies, non-UK companies with a permanent establishment or branch in the UK, and many clubs, societies, co-operatives and unincorporated associations generating taxable profits. It covers trading profits, investment income and chargeable capital gains. Sole traders and ordinary partnerships do not pay corporation tax; they report profits through Self Assessment. Every UK limited company must register with HMRC within three months of starting to trade.

How do associated companies affect corporation tax thresholds?

Associated companies share the £50,000 and £250,000 thresholds equally. Two companies under common control each get limits of £25,000 and £125,000. Three associated companies bring the small profits limit down to roughly £16,667 each. HMRC counts any company controlled by the same person or connected persons, including certain family members and trusts. Dormant companies are ignored. Group structures need careful review to avoid losing access to the small profits rate.

How are corporation tax thresholds adjusted for short accounting periods?

The £50,000 and £250,000 thresholds assume a 12-month accounting period. For shorter periods, both limits are pro-rated on a daily basis. A six-month period has a small profits limit of £25,000 and an upper marginal relief limit of £125,000. This typically happens in the first year of trading, on a change of year-end, or when a company ceases to trade. Pro-rating also applies alongside any split between associated companies.

When is corporation tax due and how is it paid?

Corporation tax is due nine months and one day after the end of the accounting period for companies with profits up to £1.5 million. A 31 March year-end means payment by 1 January the following year. Companies with profits above £1.5 million pay in quarterly instalments. The CT600 return must be filed within 12 months of the period end. Late payment attracts interest and late filing triggers automatic penalties starting at £100.

Do non-UK resident companies pay the same corporation tax rate?

Non-UK resident companies that trade through a UK permanent establishment pay UK corporation tax on the profits attributable to that branch. They pay at the 25% main rate and cannot access the 19% small profits rate or marginal relief, regardless of profit size. Non-resident landlord companies holding UK property also pay corporation tax at 25%. The restriction reflects HMRC policy that the lower rate is reserved for smaller UK-resident trading companies rather than overseas groups with UK activity.

What is a close investment-holding company for corporation tax?

A close investment-holding company is a close company whose main activity is holding investments rather than trading. Typical examples include companies holding portfolio shares, letting property to connected parties, or receiving mainly passive rental and investment income. These companies pay corporation tax at the 25% main rate on all taxable profits, regardless of profit level, and cannot claim the small profits rate or marginal relief. Companies letting property commercially to unconnected tenants remain eligible for the standard tiered rates.