How Much Corporation Tax Will I Pay in the UK in 2025/26?
If you run a limited company, one of the most common questions you’ll ask is:
How much Corporation Tax will my company pay?
The answer depends on:
- Your company’s taxable profits
- Whether you have associated companies
- Whether marginal relief applies
- Your accounting period
In 2025/26, Corporation Tax is no longer a simple flat rate for most profitable companies.
In this guide, we explain:
- The current Corporation Tax rates
- How marginal relief works
- What happens between £50,000 and £250,000
- How associated companies affect your rate
- Worked examples
- How to estimate your bill
What Is the Corporation Tax Rate in 2025/26?
For the 2025/26 financial year, the Corporation Tax rates are:
- 19% for companies with profits up to £50,000
- 25% for companies with profits over £250,000
- A marginal relief band between £50,000 and £250,000
This means most small and medium-sized companies do not simply pay 19% or 25%.
If your profits fall between £50,000 and £250,000, your effective tax rate gradually increases between those two levels.
What Are “Taxable Profits”?
Corporation Tax is charged on taxable profits, not turnover.
Taxable profits generally include:
- Trading profits
- Investment income
- Chargeable gains
Before tax is calculated, you deduct allowable business expenses such as:
- Salaries
- Employer pension contributions
- Rent
- Professional fees
- Equipment (via capital allowances)
The number that remains is your taxable profit.
If My Company Makes Under £50,000, How Much Will I Pay?
If your taxable profits are £50,000 or less (and you have no associated companies):
You will pay 19% Corporation Tax.
Example:
Profit: £40,000
Corporation Tax at 19% = £7,600
This is the simplest scenario.
However, many companies exceed £50,000 once directors stop leaving profits in the business.
What If My Profits Are Between £50,000 and £250,000?
This is where marginal relief applies.
You do not jump straight from 19% to 25%.
Instead, the effective rate gradually increases across the band.
The calculation works by:
-
Applying a 25% main rate
-
Deducting marginal relief using a statutory formula
The result is an effective rate somewhere between 19% and 25%.
Example: £100,000 Profit
Assume:
- No associated companies
- Taxable profit: £100,000
The effective Corporation Tax rate is approximately 24.25%.
Corporation Tax payable: around £24,250.
This surprises many directors who expect 19%.
Example: £150,000 Profit
At £150,000 profit, the effective rate increases further.
Corporation Tax payable would be approximately £36,750.
The closer you move to £250,000, the closer your rate moves to 25%.
What Happens Above £250,000?
If taxable profits exceed £250,000:
You pay 25% Corporation Tax on all taxable profits.
Example:
Profit: £300,000
Corporation Tax at 25% = £75,000
There is no marginal relief above this point.
Associated Companies: Why They Matter
The £50,000 and £250,000 thresholds apply to standalone companies.
If your company has associated companies, these limits are divided.
An associated company is broadly one under common control.
For example:
- You own two limited companies.
The thresholds are divided by the number of associated companies plus your own.
If there are two associated companies total:
- Lower limit becomes £25,000
- Upper limit becomes £125,000
This means you reach the 25% rate much sooner.
Many property and trading structures are caught by this rule.
Example: Two Companies, £100,000 Profit Each
If you own two companies and each makes £100,000:
The thresholds are halved.
Each company is much closer to the 25% main rate.
Your effective Corporation Tax rate may be higher than expected.
This is a common planning oversight.
When Is Corporation Tax Due?
Corporation Tax must be paid:
9 months and 1 day after the end of your accounting period.
For example:
Year-end: 31 March 2026
Tax due: 1 January 2027
The Company Tax Return (CT600) is due 12 months after year-end.
Payment is required before filing.
Late payment triggers interest immediately.
How Can I Estimate My Corporation Tax Bill?
A rough estimate is:
- 19% if profits are under £50,000
- Around 24–25% if profits exceed £100,000
- 25% if profits exceed £250,000
However, for accurate figures you must consider:
- Associated companies
- Capital allowances
- Pension contributions
- Losses brought forward
- Investment income
Simple percentage assumptions can be misleading.
Can I Reduce My Corporation Tax Bill?
Yes — but only within the law.
Common legitimate strategies include:
1. Pension Contributions
Employer pension contributions:
- Reduce taxable profits
- Are usually deductible
- Can be highly tax-efficient
2. Timing of Expenditure
Bringing forward legitimate business expenses before year-end reduces profit.
3. Capital Allowances
Certain equipment purchases may qualify for full deduction in the year of purchase, depending on available allowances.
4. Director Remuneration Planning
Balancing salary and dividends affects:
- Corporation Tax
- Personal tax
- Overall household tax efficiency
5. Loss Relief
Trading losses may be:
- Carried forward
- Carried back (in some cases)
- Offset against profits
Proper planning is key.
Do All Companies Pay Corporation Tax?
Most limited companies do.
However:
- Dormant companies do not pay Corporation Tax.
- Charities may have exemptions.
- Some non-profit organisations have different treatment.
For standard trading limited companies, Corporation Tax applies to taxable profits.
What About Close Investment Holding Companies?
Close investment holding companies do not qualify for the small profits rate and typically pay the 25% main rate.
This often affects:
- Property investment companies
- Companies holding passive investments
This distinction is frequently overlooked.
Why Many Directors Underestimate Their Tax Bill
Common reasons include:
- Assuming the 19% rate still applies broadly
- Ignoring marginal relief
- Forgetting associated company rules
- Not budgeting for tax quarterly
- Withdrawing funds without considering tax impact
Corporation Tax planning should not be left until the year-end.
Quick Reference Table (Standalone Company)
| Taxable Profits | Approximate Effective Rate |
|---|---|
| £30,000 | 19% |
| £75,000 | ~22% |
| £100,000 | ~24% |
| £200,000 | ~24.75% |
| £300,000 | 25% |
This is a guide only and assumes no associated companies.
Final Answer: How Much Corporation Tax Will I Pay?
In 2025/26:
- 19% if profits are £50,000 or below
- Between 19% and 25% if profits are between £50,000 and £250,000
- 25% if profits exceed £250,000
The exact amount depends on:
- Taxable profits
- Associated companies
- Available deductions
- Reliefs and allowances
If your company’s profits regularly exceed £50,000, the effective rate is likely higher than 19%.
Accurate forecasting and planning throughout the year can prevent unexpected tax bills and improve cash flow.
If you are unsure what rate applies to your company, a structured review of your profit levels and company structure is advisable before your year-end. Talk to Merranti Accounting today to see how we can help you.
