Corporation tax rates are unchanged for the financial year that began on 1 April 2026. The main rate stays at 25 per cent on profits above £250,000, the small profits rate stays at 19 per cent on profits of £50,000 or less, and marginal relief continues to bridge the gap.
That leaves the three-band structure introduced on 1 April 2023 in place for a fourth consecutive year. HMRC’s published rates and allowances set the marginal relief standard fraction at 3/200 for the 2026 financial year, the same figure that applied in 2025, with the lower limit at £50,000 and the upper limit at £250,000.
Between 1 April 2015 and 31 March 2023 a single rate of corporation tax applied to all companies, according to HMRC’s guidance. The three-band calculation set out below dates only from April 2023.
How marginal relief works
A company with profits inside the band does not pay a blended rate directly. It calculates tax at the 25 per cent main rate, then deducts marginal relief.
The relief is the standard fraction multiplied by the difference between the £250,000 upper limit and the company’s augmented profits, adjusted where augmented profits and taxable total profits differ. For a company with no associated companies and no dividend income from outside its group, the two figures are the same and the arithmetic is short.
A company with £100,000 of taxable profits is charged £25,000 at the main rate, then deducts relief of 3/200 of £150,000, which is £2,250. The bill is £22,750, an effective rate of 22.75 per cent.
At £150,000, the main rate charge is £37,500, and the relief is £1,500, leaving £36,000, or 24 per cent.
At £200,000 the charge is £50,000, the relief is £750, and the bill is £49,250, or 24.625 per cent.
HMRC describes the effect of the relief as a gradual increase in the corporation tax rate between the small profits rate and the main rate. The rate applied to each additional pound of profit inside the band is higher than either headline rate. A company at £50,000 pays £9,500, and a company at £250,000 pays £62,500, so the £53,000 of extra tax falls on £200,000 of extra profit, a marginal rate of 26.5 per cent.
HMRC guidance states that non-UK resident companies and close investment holding companies cannot claim marginal relief, and nor can any company whose profits exceed the upper limit. HMRC publishes a marginal relief calculator on the tax service site for companies checking the figure.
The measure uses augmented profits rather than taxable profits alone, which includes certain distributions received from companies outside the group. Where a company has no such income the two figures match.
Associated companies cut both limits
The £50,000 and £250,000 thresholds are divided by the total number of associated companies, counting the claimant itself.
HMRC’s guidance gives the worked example of a company with three associated companies. The limits are divided by four, giving a lower limit of £12,500 and an upper limit of £62,500. A company in that position with £70,000 of profits pays the full 25 per cent rather than 19 per cent with relief.
The same proportionate reduction applies to short accounting periods. A company filing for a six-month period has limits of £25,000 and £125,000.
For owner-managers running more than one company, the association rules can change the rate without profits moving at all. A second trading company under common control halves both limits for each.
When the tax is due
Companies with taxable profits up to £1.5m pay corporation tax in a single payment, due nine months and one day after the end of the accounting period. A company with a 31 March 2026 year end has a payment date of 1 January 2027.
Above £1.5m, tax is paid in quarterly instalments. For a 12-month accounting period, HMRC sets the first instalment at six months and 13 days after the first day of the period, the second and third at three-month intervals after that, and the fourth at three months and 14 days after the period ends. Two of the four therefore fall before the year has finished.
Companies with profits above £20m fall into a separate very large company regime with earlier instalment dates. Both the £1.5m and £20m thresholds are divided among associated companies in the same way as the marginal relief limits.
There is an exception for companies crossing the threshold for the first time. A company whose profits are no more than £10m and which was not large in the previous 12 months is not required to pay by instalments for that period.
The company tax return is a separate deadline from the payment and falls 12 months after the end of the accounting period, three months after the tax is due. HMRC charges late filing penalties even where there is no tax to pay.
Periods that straddle 1 April
Corporation tax rates are set by financial year, which runs from 1 April to 31 March, rather than by the 6 April tax year that applies to income tax and National Insurance.
Where an accounting period spans a rate change, HMRC requires profits to be apportioned by the number of days falling into each financial year, with the relevant rate applied to each share. Because the rates and limits for the 2025 and 2026 financial years are identical, that apportionment produces no difference for periods straddling 1 April 2026.
Corporation tax is only the first charge on company profits. Money taken out by shareholder directors is taxed again through dividend tax, where the rates did change in April 2026, and companies carrying out qualifying innovation can reduce the charge through research and development tax credits.
The Budget delivered on 26 November 2025 raised dividend and savings rates and extended the freeze on income tax thresholds to 2031. HMRC’s published figures leave the corporation tax rates and limits for the 2026 financial year unchanged.
Cherry Martin
Cherry is Associate Editor of Business Matters with responsibility for planning and writing future features, interviews and more in-depth pieces for what is now the UK’s largest print and online source of current business news.
Leave a comment