What Are the Current Corporation Tax Rates in the UK?

Published: 10 May 2026

A company earning £40,000 in profit expects to pay corporation tax at 19%. Then it discovers it has one associated company under common control, and its small profits threshold drops to £25,000. The lower rate never protected part of that profit.

This is where many corporate tax mistakes begin. Most directors know the headline rates of 19% and 25%, but very few check the thresholds properly. Associated companies, augmented profits, and the Close Investment-Holding Company rules can quickly change the result, and many CT600 returns are filed on the wrong assumption.

This guide covers the current UK corporation tax rates for 2026–27, when the 19% and 25% rates apply, how marginal relief works, and why HMRC’s August 2025 compliance letters matter for clients with associated companies.

The Two Rates and When Each Applies

Small Profits Rate: 19%

The 19% small profits rate applies to companies with profits of £50,000 or less per accounting period. That threshold does not stay fixed. It reduces in two situations. First, it is time-apportioned for accounting periods shorter than 12 months. Second, it is divided by the number of associated companies.

A company with no associated companies keeps the full £50,000 threshold. One associated company reduces it to £25,000. Three associated companies reduce it to £12,500.

This is often missed in family-owned structures and group companies. If your client has never checked their associated company count before filing, they may have been using the wrong threshold for years.

A nine-month accounting period also changes the position. Without associated companies, the lower threshold becomes £37,500, not £50,000. Always adjust the time period first.

Main Rate: 25%

The 25% main rate applies to profits above £250,000, with the same associated company adjustment applied to the upper threshold. There is one important exception that many rate tables ignore: Close Investment-Holding Companies.

CIHC Exception: A Close Investment-Holding Company (CIHC) cannot use the small profits rate or marginal relief. It pays 25% from the first pound of profit. This usually applies where a company mainly holds investments for participants rather than trading.

If your client owns a holding company that mainly holds shares and receives dividends, check the status before assuming 19% applies. Missing this creates an incorrect CT calculation that will not survive review.

How Marginal Relief Works

The Real Rate in the Middle Band

Profits between £50,000 and £250,000 fall into marginal relief. This reduces the tax bill below the full 25% main rate.

Take a company with £150,000 of profits and no associated companies. The main tax rate would be £37,500. Marginal relief reduces this by £1,500, leaving corporation tax of £36,000. The effective overall rate becomes 24%.

Planning Insight: The figure that matters for planning is 26.5%. That is the effective marginal rate on each additional pound of profit in this middle band. It is the rate your client should consider when deciding whether to retain profits in the company or extract them.

Augmented Profits and the Rate Band

The thresholds apply to augmented profits, not just trading profit. This includes trading profit plus dividends received from non-group companies. Investment income from outside holdings can push a company into the main rate band even when trading profits look safely below the threshold.

Before advising on corporation tax, confirm the augmented profits figure, not just the profit shown in the accounts.

Associated Companies and What They Do to the Thresholds

Two companies are associated when one controls the other, or both are under common control.

This happens regularly in family-owned businesses, often without directors realising it. Separate companies owned by a husband and wife may still be associated, depending on the level of control.

How The Thresholds Divide

Associated Companies Lower Threshold (19%) Upper Threshold (25%)
0 £50,000 £250,000
1 £25,000 £125,000
2 £16,667 £83,333
3 £12,500 £62,500

This is not a detail to check at year-end. It should be confirmed before every CT600 is prepared.

Corporation Tax & Marginal Relief Calculator

Quickly check how your augmented profits and associated companies impact your corporation tax liability and effective rate (based on a 12-month accounting period).

Note: This calculation assumes a standard 12-month accounting period and that the company is not a Close Investment-Holding Company.

HMRC’s August 2025 Marginal Relief Letters

In August 2025, HMRC sent compliance letters to companies that may have claimed marginal relief using the wrong associated company count.

The issue was common in family-owned businesses and multi-entity groups where associated companies were undercounted, and relief was overclaimed.

Action Required: If your client received one of these letters, timing matters. A CT600 can be amended within 12 months of the filing deadline. After that, the correction usually requires voluntary disclosure.

For companies with accounting periods ending in early 2024, some amendment windows are already closing.

If your team has not reviewed CT600 returns filed since April 2023 for multi-company clients, now is the time.

When Corporation Tax Is Due

Corporation tax is due 9 months and 1 day after the end of the accounting period. The CT600 return is due 12 months after the same date. The tax is paid before the return is submitted.

Example Timeline: For a company with a 31 March year-end, corporation tax is due by 1 January, while the CT600 is due by 31 March. Many new directors miss the payment date because they assume both deadlines fall together.

Late payment interest makes even short delays expensive, so timing matters as much as the calculation.

Large companies with annual taxable profits above £1.5 million may also move into quarterly instalments. This threshold can also be reduced depending on related 51% group companies, so the group structure should be reviewed before the accounting period begins.

Final Thoughts

Before submitting any CT600 with marginal relief, three checks matter most: confirm the augmented profits figure, count the associated companies for that accounting period, and check whether the company qualifies as a CIHC.

Those three checks decide whether your client pays 19%, something between 19% and 25%, or the full 25%. Most corporate tax mistakes do not come from complex legislation. They stem from assuming the headline rate applies without checking the underlying structure.

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Let Acxite help you stay ahead of associated company checks, corporation tax deadlines, and compliance reviews before filing season creates pressure.

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