Corporation Tax stays at 25% main rate with 19% for small profits

Correct as at 9 November 2026.

Companies pay Corporation Tax at a main rate of 25%, with a 19% small profits rate for profits of £50,000 or less, and Marginal Relief may apply to profits in between.

What are the two rates?

The main rate of Corporation Tax on company profits is 25%, and HMRC said it applies to companies with profits above £250,000.

The small profits rate is 19%, and it applies to companies whose profit is £50,000 or less.

Profits between £50,000 and £250,000 sit in a middle band, where a company “may be entitled to” Marginal Relief, according to the same guidance.

For taxable profits from 1 April 2023, the guidance on allowances and reliefs sets the same £50,000 and £250,000 limits for Marginal Relief.

What do the rates mean in pounds?

At the small profits rate of 19%, a company with £50,000 of profit would owe £9,500 in Corporation Tax.

At the main rate of 25%, a company with £300,000 of profit, which is above the £250,000 line, would owe £75,000.

Profits between the two limits are the only ones where Marginal Relief is in play, so neither flat rate applies automatically to them.

Who pays which rate, and who is treated differently?

The £50,000 and £250,000 limits are not fixed for every company, because they are proportionately reduced for short accounting periods.

They are also reduced by the total number of “associated companies” a company has, so a group member can face lower limits than a stand-alone firm.

Profits from oil rights or extraction in the UK or on the UK continental shelf, known as ring fence profits, are taxed at different rates.

An accounting period is the time covered by a Company Tax Return, and it cannot be longer than 12 months.

It is normally the same as the financial year covered by the company’s annual accounts, though it can differ in the year a company is set up.

What was the rule before April 2023?

From 1 April 2015 to 31 March 2023, a single rate of Corporation Tax applied to all companies, whatever their profits.

The explanatory notes to the Finance Act 2013 show that section 6 set the main rate at 20% for the financial year beginning 1 April 2015.

The aim, set out at Budget 2013, was to unify the main rate with the small profits rate from that financial year.

Profits made before 1 April 2015 are taxed at a rate that depends on the size of those profits.

What if two rates apply in one accounting period?

Where more than one rate applies, tax is worked out by counting the days at each rate and calculating the tax due for each.

HMRC’s example is an accounting period of 1 January 2023 to 31 December 2023, which spans two financial years.

The rate for the financial year starting 1 April 2022 applies for 90 days, from 1 January 2023 to 31 March 2023.

The rate for the financial year starting 1 April 2023 applies for the remaining 275 days, from 1 April 2023 to 31 December 2023.

What can reduce the taxable profit?

Rates are applied to taxable profit, and HMRC’s guidance on expenses says limited companies may be able to deduct some costs of running the business.

Revenue expenses, the day-to-day costs of running a business, can be deducted if they were incurred wholly for a business purpose.

Capital expenses, such as buying a van to deliver goods or a server used for several years, cannot be deducted for Corporation Tax.

A company may instead be able to claim capital allowances on assets kept for use in the business, including equipment, machinery and business vehicles.

Some expenses are specifically disallowed, and entertaining clients is the example HMRC gives of a cost that cannot be deducted.

Other reliefs listed include Research and Development Relief, the Patent Box for profit from patented inventions, and relief for trading losses.

A company that thinks it has overpaid Corporation Tax may be able to claim the money back through overpayment relief.

How can a company check its position?

HMRC’s accounting period guidance says companies can check their accounting period dates by signing in to their business tax account.

A company adding Corporation Tax services receives a letter from HMRC giving its first accounting period dates, and it should tell HMRC if the dates look wrong.

Where accounts cover more than 12 months, two returns must be filed, because an accounting period cannot exceed 12 months.

A company that lengthens its financial year must contact HMRC before the original filing date of its Company Tax Return, or it may face a late filing penalty.