UK corporation tax is a tax on the taxable profits of limited companies. In 2026 there are two rates: 19% on profits up to £50,000 (small profits rate) and 25% on profits above £250,000 (main rate), per HMRC. Profits between those thresholds attract marginal relief, which gradually increases the effective rate from 19% to 25%.
What is the UK corporation tax rate in 2026?
The UK operates a two-rate corporation tax system introduced in April 2023. The rate that applies to your company depends on its annual taxable profit — not its turnover.
| Profit level | Rate | Name |
|---|
| £0 – £50,000 | 19% | Small profits rate |
| £50,001 – £250,000 | 19%–25% | Marginal relief applies |
| Over £250,000 | 25% | Main rate |
Marginal relief means the effective rate rises gradually between £50,001 and £250,000 — you do not jump straight from 19% to 25% once profits cross £50,000. HMRC provides a marginal relief calculator on GOV.UK.
The thresholds are divided by the number of associated companies. If your company has one associated company, each company's thresholds are halved: £25,000 and £125,000 per HMRC.
What counts as taxable profit for corporation tax?
Corporation tax is calculated on taxable profit, which is your company's accounting profit adjusted for non-deductible items. The starting point is your profit and loss account.
Items that reduce taxable profit include: director and staff salaries (deductible in full), rent and business premises costs, equipment (via capital allowances), software subscriptions, professional fees, marketing spend, and employer pension contributions.
Items that do not reduce taxable profit include: dividends paid to shareholders, client entertainment (wholly excluded), fines and penalties, and personal expenses passed through the company.
What can you deduct from corporation tax?
Deductible expenses
- · Director and staff salaries + employer NI
- · Employer pension contributions
- · Rent, rates, utilities for business premises
- · Equipment and machinery (via capital allowances)
- · Software and subscriptions
- · Marketing and advertising
- · Professional fees (accountants, solicitors)
- · Travel (business purpose, not commuting)
Not deductible
- · Dividends paid to shareholders
- · Client entertainment (wholly excluded)
- · Personal expenses paid via company
- · Fines and regulatory penalties
- · Capital repayments on loans
- · Depreciation (replaced by capital allowances)
When do you pay corporation tax?
Two separate deadlines apply — one for paying the tax, one for filing the return. Most small companies are confused by this because they fall on different dates.
Payment deadline: 9 months and 1 day after the end of your accounting period, per HMRC. For a company with a 31 March year-end, payment is due 1 January the following year.
CT600 return deadline: 12 months after the end of the accounting period. For the same 31 March year-end, the return is due 31 March the following year — three months after the tax was already due.
How do you pay corporation tax to HMRC?
You pay via HMRC's online tax payment service using your company's unique taxpayer reference (UTR). Payment methods include: bank transfer (Faster Payments or CHAPS), Direct Debit, or debit card. Credit card payments are not accepted by HMRC.
Before paying, your accountant (or you, using HMRC's Corporation Tax Online service) will calculate the exact amount due and file the CT600 return. The CT600 is a detailed return covering income, expenses, allowances, and the tax calculation.
What are capital allowances and how do they reduce corporation tax?
Capital allowances are the tax equivalent of depreciation. When a company buys a capital asset — machinery, equipment, vehicles, computers — the cost is not expensed on the P&L but deducted over time through capital allowances.
The Annual Investment Allowance (AIA) allows most businesses to deduct 100% of qualifying capital expenditure up to £1,000,000 in the year of purchase, per HMRC. This means a £20,000 equipment purchase reduces taxable profit by £20,000 immediately rather than over several years.
How does the associated companies rule affect corporation tax?
If you own or control more than one company, HMRC may treat them as associated companies. When companies are associated, the £50,000 and £250,000 profit thresholds are divided equally between them.
Two associated companies each get thresholds of £25,000 and £125,000. Four associated companies get £12,500 and £62,500 each. This means holding company structures can inadvertently push individual companies into the 25% rate at much lower profit levels than expected.
Frequently asked questions
What is the corporation tax rate for small businesses in the UK in 2026?
Small UK limited companies with taxable profits of £50,000 or less pay corporation tax at 19% (the small profits rate), per HMRC. Companies with profits above £250,000 pay 25% (the main rate). Profits between £50,001 and £250,000 attract marginal relief, with an effective rate between 19% and 25%.
When is the corporation tax deadline for a small company?
The corporation tax payment deadline is 9 months and 1 day after your accounting period ends. The CT600 return deadline is 12 months after the accounting period ends. These are different dates — the tax must be paid before the return is due, per HMRC.
Can a limited company deduct director salaries from corporation tax?
Yes. Director salaries are a business expense and are fully deductible from the company's taxable profit, per HMRC. This is one reason the salary-plus-dividends model is tax-efficient: the salary reduces corporation tax, while dividends (paid from post-tax profit) are not subject to National Insurance.
What is marginal relief for corporation tax?
Marginal relief applies to UK companies with profits between £50,001 and £250,000. It gradually increases the effective corporation tax rate from 19% to 25% across that range, so there is no sudden jump. HMRC provides a marginal relief calculator on GOV.UK to calculate the exact liability.
Do I need an accountant to file a corporation tax return?
There is no legal requirement to use an accountant, but the CT600 is a detailed return requiring accurate calculation of taxable profit, capital allowances, and adjustments. Most limited company directors use an accountant. For straightforward companies with simple accounts, some do file themselves using HMRC's Corporation Tax Online service.