UK Corporation Tax & Marginal Relief Calculator
Model your company’s Corporation Tax liability under HMRC’s dual-rate system: the 19% Small Profits Rate, the 25% Main Rate, and the 26.5% effective marginal tax trap on profits between £50,000 and £250,000. Includes associated company limit division, short accounting periods, and pension tax relief.
Company & Accounting Period
Under common control (51%+). Both limits divide by (1 + count).
Thresholds scale down proportionally for periods under 12 months.
Profits & Deductions
Augmented Profits = Taxable Profits + FII. Used solely to test the £50k/£250k boundaries.
Salaries, rent, software, utilities, travel
Deductible directly from trading profits
Plant, machinery, computers, tooling
Tax Planning Sandbox ("What If?")
Test how making an additional employer pension contribution or qualifying capital investment before your company year-end reduces your Corporation Tax liability:
Corporation Tax Payable
26.5% Marginal Tax Zone
Your profits fall in the £50,000–£250,000 taper band. Each extra £1 of profit earned is effectively taxed at 26.5% due to relief reduction.
HMRC Mathematical Step-by-Step Proof
Under the Corporation Tax Act 2010 (Part 3, Section 19), Marginal Relief is calculated using the standard fraction formula below. Here is the exact calculation applied to your figures:
Complete Guide to UK Corporation Tax & Marginal Relief (2024/2025/2026)
Since 1 April 2023, the United Kingdom ended its decade-long 19% flat Corporation Tax rate and transitioned to a tiered rate regime under the Corporation Tax Act 2010. Understanding the interactions between the Small Profits Rate, Main Rate, and Marginal Relief is critical for company directors, accountants, and finance managers.
Small Profits Rate (19%)
Applies to UK resident companies with augmented profits up to £50,000 (pro-rated for associated companies and short periods). Designed to shelter small businesses and start-ups from higher tax burdens.
The 26.5% Marginal Trap
Between £50,000 and £250,000, Marginal Relief gradually tapers. Because relief is withdrawn at a 1.5% rate while standard tax is 25%, every additional £1 earned in this band suffers an effective 26.5% tax rate.
Main Rate (25%)
Applies to companies with augmented profits exceeding £250,000. All profits are taxed at a straight 25%, with zero marginal relief granted.
Strategic Tax Planning in the 26.5% Band
Operating in the marginal band means that tax deductions are worth significantly more (26.5p per £1) than they are for small companies (19p) or large companies (25p). Common tax mitigation strategies include:
✔ Employer Pension Contributions
Employer pension contributions are treated as an allowable business expense provided they meet the 'wholly and exclusively' test. Contributing £20,000 directly from company profits into a director's SIPP or workplace pension yields an immediate £5,300 Corporation Tax saving (26.5%).
✔ Annual Investment Allowance (AIA) & Full Expensing
The permanent £1,000,000 Annual Investment Allowance allows 100% upfront write-off for qualifying plant, machinery, IT equipment, and commercial vehicles. Timing these purchases before year-end directly cuts profits in the 26.5% zone.
✔ Associated Company Group Restructuring
Under CTA 2010 s18E, having dormant or non-trading subsidiaries does not trigger associated company rules, but active sister companies will divide thresholds. Reviewing corporate structures to amalgamate active businesses can restore full £50k/£250k thresholds.
✔ Director Salary vs Dividend Optimization
While dividends are not deductible for Corporation Tax, director salaries are. In 2024/25 and 2025/26, balancing the optimal secondary NI threshold salary (£9,100 or £12,570 depending on Employment Allowance eligibility) generates Corporation Tax deduction at 26.5%.
Understanding Associated Companies (CTA 2010 Section 18E)
A company is an 'associated company' of another if one has control of the other, or both are under the control of the same person or persons. Control is measured by voting power, share capital, or rights to company assets on winding up. Dormant companies and passive holding companies are excluded from the count.
| Associated Companies (N) | Total Divisor (N + 1) | Small Profits Limit (19%) | Main Rate Limit (25%) |
|---|---|---|---|
| 0 (Single Entity) | 1 | £50,000 | £250,000 |
| 1 Associated | 2 | £25,000 | £125,000 |
| 2 Associated | 3 | £16,667 | £83,333 |
| 3 Associated | 4 | £12,500 | £62,500 |
Frequently Asked Questions
Clear, definitive answers to common UK Corporation Tax, Marginal Relief, and filing questions.
What are the UK Corporation Tax rates for 2024, 2025, and 2026? ▼
The UK applies a dual-rate system: the 19% Small Profits Rate for augmented profits up to £50,000, and the 25% Main Rate for augmented profits over £250,000. For companies earning between £50,000 and £250,000, Marginal Relief reduces the tax bill, creating a sliding scale effective rate between 19% and 25%.
Why is the marginal tax rate 26.5% between £50,000 and £250,000? ▼
Marginal relief is calculated by subtracting 3/200 (1.5%) of the difference between £250,000 and your profits from your 25% gross tax. Mathematically, Corporation Tax = 0.25 × Profits - 0.015 × (250,000 - Profits) = 0.265 × Profits - 3,750. The derivative with respect to profits is exactly 0.265 (26.5%). This means that within this band, every additional £100 of profit incurs £26.50 in tax.
What is Franked Investment Income (FII) and how does it affect my tax? ▼
Franked Investment Income (FII) refers to distributions and dividends received by your company from non-group companies. FII is not directly subject to Corporation Tax because the paying company has already paid tax on its earnings. However, FII is added to your taxable profits to calculate 'Augmented Profits', which are used to determine whether you cross the £50,000 and £250,000 thresholds.
When do I have to pay Corporation Tax to HMRC? ▼
For companies with taxable profits under £1.5 million, Corporation Tax must be paid electronically 9 months and 1 day after the end of your accounting period (e.g. for a period ending 31 December, payment is due on 1 October). The CT600 Corporation Tax return must be filed within 12 months of the period end.
What are Quarterly Instalment Payments (QIPs)? ▼
Companies categorized as 'large' by HMRC (augmented profits exceeding £1.5 million, divided by the number of associated companies) cannot wait 9 months to pay their tax. Instead, they must pay Corporation Tax in four quarterly instalments starting in month 7 of their accounting year.
Is my data private when using this calculator? ▼
Yes, 100%. FreeCalcSuite operates entirely client-side inside your browser's local memory. No financial figures, turnover, profits, or company structures are ever transmitted to any remote server or third-party analytics provider.