UK Corporation Tax Explained: Rates, Marginal Relief and Deadlines (2026/27 Guide)

If you run a UK limited company, Corporation Tax is unavoidable, even dormant companies have filing obligations. Here's exactly how much you'll pay, when, and how the two-tier rate system actually works.

What is Corporation Tax?

Corporation Tax is paid by UK limited companies on their taxable profits: trading profits, investment income, and chargeable gains from selling assets. Unlike Income Tax, there's no personal allowance; tax applies from the first pound of profit, at a rate that depends on how much you make. If your company is also VAT-registered, our VAT guide covers registration, schemes and MTD compliance.

Who pays it: all UK limited companies, including dormant ones (which must still file, even with nothing to pay), foreign companies with a UK branch, and clubs, associations and unincorporated bodies in some cases.

Current Corporation Tax rates (2026/27)

Since April 2023, the UK has used a two-tier system instead of a single flat rate:

Profit level	Rate
Up to £50,000	19% (small profits rate)
£50,001 to £250,000	Marginal relief applies (effective rate rises from 19% to 25%)
Over £250,000	25% (main rate)

These thresholds are for a company with a standard 12-month accounting period and no associated companies. Both figures are proportionally reduced if either of those doesn't apply to you.

How marginal relief actually works

Rather than jumping straight from 19% to 25% once you cross £50,000 profit, marginal relief tapers the rate gradually. The mechanical effect: every additional pound of profit between £50,000 and £250,000 is effectively taxed at 26.5%, genuinely higher than the 25% main rate itself, because the relief is clawing back the benefit of the lower rate as profits rise.

In practice, most accounting software (and HMRC's own calculator) works this out for you, you don't need to calculate it by hand. But understanding that the marginal band carries the highest effective rate matters for tax planning: if you're hovering near £50,000 or £250,000 profit, the timing of income and allowable expenses can genuinely change your tax position.

Associated companies reduce your thresholds

If you control more than one company (an "associated company", broadly, companies under common control), the £50,000 and £250,000 thresholds are divided by the number of associated companies.

Example: with one associated company, your thresholds halve to £25,000 and £125,000 each, meaning you reach the higher effective rates on much lower profits than a standalone company would. This is a common trap for business owners who've set up a second company (even a dormant or low-activity one) without realising it affects the tax position of their main trading company.

Filing and payment deadlines

• Filing deadline (CT600): 12 months after the end of your accounting period
• Payment deadline: 9 months and 1 day after the end of your accounting period, earlier than the filing deadline, which catches people out. You owe the tax before you're required to submit the return confirming the amount.
• Large companies (profits over £1.5 million, adjusted for associated companies) pay in quarterly instalments instead, a different regime most small and medium businesses won't encounter.

Late filing penalties

• £100 if you're up to 3 months late
• A further £100 if you're more than 3 months late
• If your return is 6 months late, HMRC estimates your bill and adds a 10% penalty on unpaid tax
• 12 months late adds a further 10%
• Penalties increase further, and repeatedly filing late in consecutive years increases the automatic penalties even for a first-day-late return

Late payment

Interest accrues daily on unpaid Corporation Tax from the day after the payment deadline, regardless of when you actually file.

What counts as taxable profit?

Broadly: your accounting profit, adjusted for tax purposes. Common adjustments include:

• Adding back disallowable expenses (e.g. client entertainment isn't deductible)
• Applying capital allowances instead of accounting depreciation
• Adjusting for any non-trading income (like chargeable gains on selling an asset)

Director's loans note: an overdrawn director's loan account sits separately from all of this, it is not a deductible expense and does not reduce taxable profit, but it can trigger its own S455 charge if left outstanding too long. See our director's loan account and S455 guide for the detail.

Capital allowances note: main-rate writing-down allowances for plant and machinery reduced to 14% from April 2026 (confirmed at Autumn Budget 2025), this affects how much tax relief you get on qualifying equipment and asset purchases going forward. Special rate assets remain at 6%. Full expensing (100% relief in the year of purchase for qualifying new plant and machinery) may still be available depending on your circumstances, worth checking what applies to your specific purchases.

How Books & Returns helps

Corporation Tax calculations get genuinely complicated once marginal relief, associated companies, or capital allowances come into play, small structuring decisions can meaningfully change what you owe. We handle CT600 preparation and filing, Corporation Tax computations, and proactive planning around the marginal relief band, so you're never caught off guard by a bill that's bigger than expected.

This guide is for general information only and does not constitute tax advice. Corporation Tax rules depend on your company's specific circumstances, always confirm your position with a qualified accountant or check current guidance at gov.uk before making decisions based on this content.